SEC May Charge MBIA in Reinsurance Probe
August 22, 2005
ARMONK, N.Y. (AP) - MBIA Inc., which insures bonds against default, Friday said the staff of the Securities and Exchange Commission is considering recommending suing the company over some of its reinsurance deals.
The SEC "Wells Notice" received by the Armonk, N.Y.-based company is related to MBIA's decision to retroactively reinsure losses it incurred from bonds of the Allegheny Health, Education and Research Foundation. The bonds had been guaranteed by MBIA.
MBIA has admitted that the accounting for one of the reinsurance deals was incorrect, effectively smoothing out its earnings inappropriately.
A Wells Notice is a formal notification that charges may follow, but also is often an invitation for the targeted company to make its case for why it shouldn't be sued.
MBIA said it is also in preliminary discussions with the staff of the New York attorney general to settle possible charges over the same matter.
In March, MBIA said it would restate results for a number of years due to faulty accounting for the Allegheny bond deals.