Calif. Worker Groups: Probe AIG On Comp

National Underwriter News
June 17, 2005

A consortium of California worker and consumer advocacy groups yesterday demanded that the state investigate their claims that American International Group has defrauded the state by denying care and payments to injured workers.

At a news conference outside the Los Angeles office of Gov. Arnold Schwarzenegger, the groups—including the Foundation for Taxpayer and Consumer Rights, the Consumer Federation of California and—accused AIG of cheating the state and injured workers out of millions of dollars.

The organizations demanded a complete audit of the company's actions as well as payment of any money it may have withheld.

"AIG is cheating injured workers out of their medical care and compensation, and may have cheated taxpayers out of tens of millions of dollars through the insurance fraud," said Mark Hayes, president of

Insurance companies, said Mr. Hayes, "manipulate their books and manipulate the system to avoid paying injured workers for care and compensation."

In addition, the groups criticized Gov. Schwarzenegger, saying he was turning a blind eye to AIG's actions. The governor's inaction, they said, was due to hefty political contributions made by the company and its executives.

"Gov. Schwarzenegger never stands up to his donors, and AIG has given him nearly $150,000," said Doug Heller of the Foundation for Taxpayer and Consumer Rights. "That's why the governor has not called AIG to account for apparently defrauding the state's taxpayers and businesses, and it's why he has sat back and let AIG cheat injured California workers."

A spokesman for the governor responded by noting that the authority to investigate an insurance company is in the hands of the state insurance commissioner rather than the governor, and that the issue of donations was not relevant.

Norman D. Williams, a spokesman with the California Department of Insurance, issued a statement at the press conference explaining that an investigation of AIG's actions is already underway.

"We are, and have been, aggressively investigating AIG for more than a month," Mr. Williams said in the statement. "This is a joint investigation with the New York State Insurance Department, which is the lead regulator of that company. Once we gather all of the information and determine what AIG has done, we will announce the results."

In April New York Attorney General Eliot Spitzer and Insurance Superintendent Howard Mills said AIG had cheated New York out of "tens of millions" owed the state's workers' compensation fund over more than a decade.

The New York officials said the practice to be audited, now "apparently" discontinued, involved booking premiums for workers' comp coverage as premiums for general liability coverage. They said the activity appears to have gone on for more than 10 years and continued even after AIG insiders repeatedly challenged its legality.

AIG said in April that the activity involved had generally been corrected eight years ago.

Chris Winans, a spokesman for AIG, declined to comment yesterday on the labor and consumer groups' allegations. He said that AIG is cooperating with all investigations of the company, "to the fullest extent possible."

Copyright © 2005 by National Underwriter News

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