AIG's former CEO Maurice "Hank" Greenberg agreed to pay $15 million to settle government accusations that he altered AIG's financial records to inflate its earnings between 2000 and 2005, U.S. securities regulators said on Thursday.
Howard Smith, American International Group's former chief financial officer, agreed to pay $1.5 million to settle Securities and Exchange Commission charges relating to his involvement in what the SEC has said were sham accounting transactions, the agency said.
Greenberg and Smith, who were forced out of the insurer in 2005 during the accounting scandal, agreed to settle the charges without admitting or denying any guilt.
The settlement allows Greenberg and Smith, who work together at private investment firm C.V. Starr, to put one more matter related to AIG behind them.
Greenberg, Smith, and corporate entities associated with them have been embroiled for more than four years in lawsuits brought by AIG , its shareholders, or regulators.
Last month, a jury found that Greenberg-controlled Starr International had not improperly raided a block of AIG shares that were once used to fund long-term compensation for AIG executives. U.S. district judge Jed Rakoff is expected to make decide that matter this month.
Greenberg, who built AIG into the world's largest insurer over 38 years as CEO, was forced to resign because he refused to cooperate with an internal investigation into AIG's accounting practices.
In the past year, AIG has had to rely on $180 billion in federal assistance to avoid bankruptcy after a foray into credit default swaps left it with massive losses.
Getting Past It
A statement issued on Greenberg's behalf by the law firm Boies, Schiller & Flexner said, "With these issues behind him, Mr. Greenberg looks forward to being able to concentrate on building for the future."
In a statement issued by his lawyer, Smith said he was initially inclined to fight the allegations but decided to settle to "move forward with his life without the added legal costs and distraction of this lawsuit."
The SEC had accused them of making misstatements that helped AIG falsely report results that consistently met or exceeded earnings and growth targets.
In its complaint, the SEC said there had been at least three areas of fraud: a reinsurance transaction between AIG and Berkshire Hathaway's General Re Corp that improperly boosted AIG's loss reserves; transactions with an offshore shell entity to conceal multimillion-dollar underwriting losses within AIG's auto-warranty insurance business; and other transactions that misstated investment income, or capital gains.
In 2006, the SEC charged AIG with securities fraud and improper accounting, and the company paid disgorgement of $700 million and a penalty of $100 million to settle the case.