SEC: Ex-AIG CEO Greenberg settles fraud charges
— -- The Securities and Exchange Commission on Thursday charged former top executives at American International Group for their connections with accounting violations at the struggling insurer.
The Securities and Exchange Commission on Thursday charged former top executives at American International Group for their connections with accounting violations at the struggling insurer.
Former CEO Maurice "Hank" Greenberg and former chief financial officer Howard Smith were allegedly involved with accounting that inflated AIG's financials from 2000 through 2005, the SEC said. Those accounting violations made AIG appear to be more successful than it was, the SEC said.
"Corporate leaders cannot avoid the truth and consequences of their companies' performance by using improper accounting gimmicks," Robert Khuzami, of the SEC's Division of Enforcement, said in a statement.
Greenberg agreed to pay a penalty of $7.5 million and disgorgement of $7.5 million. He did not admit or deny guilt. C.V. Starr, a financial firm where Greenberg is CEO, issued a statement saying Greenberg is "pleased that after a four-and-a-half year investigation involving the review of millions of pages of documents and numerous depositions, the SEC has now concluded not to charge Mr. Greenberg with any fraud."
The SEC's charges indicate that it determined because Greenberg is not an accountant, he relied on others for advice, says Gregory Lawrence, partner at law firm Conti Fenn & Lawrence. Still, the size of the penalty was significant, says Andrew Stoltmann of Stoltmann Law. The size of the penalty "certainly tells you there's something there," he says.
Smith agreed to pay a penalty of $750,000 and disgorgement of $750,000. Smith, who also did not admit or deny guilt, released a statement saying the settlement lets him "move forward with his life."
The action is the latest twist in AIG's history. The company has received substantial government assistance to remain functioning. And on Monday, AIG named Robert Benmosche its new president and CEO. The stock has jumped 138% since July 9 to $22.53 as investors anticipate the company's release of quarterly earnings today.
