AIG Officials Face Grand Jury Investigation

by Glen Shapiro, LawAndTax-News.com, New York

24 May 2005

After AIG was accused of using Barbados and Bermuda companies to park reinsured risks off its balance sheet inappropriately, a slew of other allegations has finally led to a grand jury investigation of potentially criminal conduct by individuals at the insurance group.

Led by New York Attorney General Eliot Spitzer, the probe into AIG has covered alleged accounting improprieties and possibly unlawful stock purchases.

AIG, which has had major interests in Bermuda for 50 years, has been under investigation since last year. In addition, the SEC, the New York attorney general's office, the New York Insurance Department and the Justice Department have been examining AIG's ex-boss Hank Greenberg's role in initiating a transaction with General Re, a reinsurance subsidiary of Berkshire Hathaway Inc., that allowed AIG to bolster reserves artificially against future claims. AIG said in late March that it did not account correctly for that transaction and others, with a total value of $3bn.

Greenberg, who was 80 last month, resigned as chief executive of AIG on March 14 and as chairman later that month. Greenberg has not been accused of wrongdoing by regulators, but when sub-poenaed to give evidence by New York Attorney General, Eliot Spitzer, on 15th April, he took the 5th amendment in response to some questions.

It is reported that AIG senior executive Joseph Umansky testified to the grand jury, and he is said to have struck a deal to receive immunity from potential charges in return for his testimony. Mr Greenberg and former Chief Financial Officer Howard I. Smith are said to be among the individuals who are the focus of the grand jury. Mr. Smith was dismissed in March for not cooperating with investigators.

Alongside the grand jury, Mr. Spitzer's office and the New York State Insurance Department are said to be drafting a civil complaint against AIG for allegedly misleading investors.

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