Ex-AIG chief settles, admits approving fraud

Settlement brings to an end a 12-year legal saga initiated in the pre-financial crisis era

Two former executives at US insurance giant AIG admitted Friday to approving fraudulent transactions which masked the company’s financial health, ending a 12-year court battle in New York.

Former CEO Maurice “Hank” Greenberg and Howard Smith, the company’s former chief financial officer, admitted to overseeing the transactions, which were designed to hide losses and inflate reserves, the New York State Attorney-General’s Office said.

Greenberg agreed to pay $9 million (Dh33 million), representing much of the bonuses he received between 2001 and 2004, the period when the transactions appeared in the company’s financial results.

The settlement brought an end to a legal saga initiated in the pre-financial crisis era by then New York Attorney-General Eliot Spitzer in 2005.

AIG itself had settled with New York in 2006, paying $1.6 billion to resolve the matter. Later elected governor, Spitzer stepped down in 2008 amida prostitution scandal. Greenberg and Smith finally went on trial in September as defence lawyers battled the charges.

Attorneys for Greenberg argued he could not have been aware of the transactions, given the size and complexity of the company.

Prosecutors alleged that Greenberg and Smith engineered a $500 million transaction with Berkshire Hathaway’s General Re to bolster AIG’s loss reserves improperly and oversaw another transaction with an offshore company to convert underwriting losses into investment losses.