By Matthew Goldstein
Senior Writer
5/31/2005 1:31 PM EDT
Updated from 9:39 a.m. EDT
Almost $4 billion of earnings vanished Tuesday when American International Group (AIG:NYSE – commentary – research) made good on its pledge to restate five years of financial results in a filing with the Securities and Exchange Commission.
The restatements appeared in the insurer’s 2004 annual report, a 400-page document whose completion was delayed three times as the company sought to rectify an accounting scandal that led to the ouster of Maurice Greenberg, the longtime chief executive.
As expected, the filing showed a 2.7% reduction in AIG’s shareholder equity since the company first estimated its 2004 results in a Feb. 9 press release. AIG was forced to reclassify phony reinsurance transactions as loans and consolidate several off-shore reinsurers onto its books.
Last week, New York Attorney General Eliot Spitzer filed civil fraud charges against AIG and Greenberg, charging the former insurance industry titan with orchestrating a series of accounting tricks and frauds to help prop up AIG’s stock price.
The “Insiders” of AIG are an interesting mix.
Maurice Greenberg (Chairman of the Board): Bush Pioneer (2000)|Ranger (2004) who accompanied Bush I to China in ’92, as a result, AIG was the first foreign company to sell insurance to China.
AIG helped Enron cook its books by investing in its notorious LJM2 partnership along with Merrill Lynch (see Stanley O’Neal) and J.P. Morgan (see Alan Buckwalter).
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Besides being a huge political funder, Greenberg is a major underwriter of the Heritage Foundation think tank (see Pioneer Elaine Chao). Imagine his horror to discover a Heritage thinker urging Congress to postpone its 2000 vote on normalizing trade with Greenberg’s beloved China. After Greenberg threatened to cut off funding, the think tank rethunk its position and issued a new report: “How Trade With China Benefits Americans.” AIG scored a revolving-door coup in ’98 when it hired Ernest Patrikis, an official departing the powerful Federal Reserve Bank of New York, as a “special adviser” to Greenberg. An AIG subsidiary, AIG Capital Partners Inc., paid a $500,000 “finder’s fee” to Pioneer Wayne Berman, who helped the company land a contract to manage $100 million in state pension investments from ex-Connecticut Treasurer Paul Silvester. Silvester was convicted in ’99 of taking kickbacks from the private money managers to whom he awarded investment contracts. AIG paid Greenberg more than $6 million in ’98 alone. Pioneer Robert J. O’Connell also was an AIG executive until recently. (2000)
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When Democrat Howard Dean was governor of Vermont, he and AIG urged corporations to dodge taxes by establishing bogus insurance subsidiaries there, which AIG managed.
Richard Holbrooke (Director), such an accomplished man!
William S. Cohen (Director), war profiteers never sleep.