Spitzer Sees Civil Resolution with AIG
By Chris Sanders and Paul Thomasch
April 4, 2005
NEW YORK (Reuters) - New York Attorney General Eliot Spitzer said on Monday he expected to reach a "civil resolution" with American International Group Inc., the giant insurance company under investigation for improper accounting.
Spitzer's statement indicated that criminal charges will not be brought against AIG, relieving investors and helping lift the stock 6 percent on the New York Stock Exchange.
"The board and current management of the company are now cooperating with this investigation," Spitzer said in a statement.
"Based upon these efforts, and based upon our knowledge to date, we believe that a civil resolution with the corporation will ultimately be achievable," Spitzer said.
Spitzer and the Securities and Exchange Commission have been examining a string of transactions involving AIG. Uncertainty over what could be uncovered and whether it would result in criminal charges have helped wipe out about $57 billion in stock-market value from AIG since the middle of February.
As scrutiny of its accounting has intensified, so have questions about AIG's relationship with Starr International Co., a controversial, privately held company that owns about 12 percent of AIG's stock and acts as a compensation vehicle for its top managers.
AIG confirmed on Monday that a number of key company executives, including Chief Executive Martin Sullivan, have been removed from the board of Starr.
Their removal could assuage some concerns about conflicts of interest between Starr and AIG. Other questions remain, however, including the role of recently ousted AIG Chairman and Chief Executive Maurice "Hank" Greenberg.
Greenberg remains the largest owner of Starr, and therefore could have a hand in compensation decisions for AIG unless the structure is changed.
The investigation of AIG's accounting has also spread to Ireland, where regulators confirmed on Monday they have been working in conjunction with U.S. authorities "for some months" investigating the deal involving AIG and a unit of Berkshire Hathaway Inc.'s General Re Corp. Reinsurer Cologne Re is 90 percent owned by General Re and has an office in Dublin.
In remarks prepared for a speech later this week, Irish Financial Services Regulatory Authority Chief Executive Liam O'Reilly says Ireland is "actively engaged" with the General Re unit and is working to ensure all "necessary corrective actions are taken."
Last week, AIG's stock sank to a two-year low after days of unnerving reports from the company and investigators. Among other disclosures during the week, AIG admitted the General Re deal was improperly booked, delayed its annual report, and announced the resignation of Greenberg.
In another twist, AIG said over the weekend that it had become aware of efforts to remove documents and information from its Bermuda building without permission.
AIG's Sullivan wrote in a letter to shareholders dated April 3 that the insurer had brought the incidents to the attention of the authorities.
"We have been working closely with regulators and other authorities to ensure that everyone throughout the organization complies with AIG's policy of full cooperation with all investigative efforts," Sullivan wrote in the letter.
Two Wall Street banks Monday responded to the recent sharp slide in AIG's shares by raising their investment rating on the insurer. Morgan Stanley increased its rating to "overweight" from "equal weight" and Smith Barney upped its rating to "buy" from "hold."
"We believe the downdraft Friday leaves the shares at an attractive valuation, more than compensating investors for potential risks," Smith Barney wrote in a note to clients.
AIG shares rose $3.10, or 6.1 percent, to $54.05 on Monday afternoon after hitting $54.75 earlier in the session.