Greenberg settles AIG charges for $15 million
Regulators say the former chief executive of the insurer agreed to statements that artificially inflated earnings.
NEW YORK (CNNMoney.com) -- Maurice "Hank" Greenberg, former chief executive of American International Group, has agreed to pay $15 million to settle charges related to an accounting scandal, the Securities and Exchange Commission said Thursday.
A complaint filed by the SEC said Greenberg and former chief financial officer Howard Smith were involved in "numerous improper accounting transactions" that inflated AIG's reported financial results between 2000 and 2005.
Smith agreed to pay $1.5 million to settle the charges, the SEC said.
"Corporate leaders cannot avoid the truth and consequences of their companies' performance by using improper accounting gimmicks and signing off on distorted financial reports," said Robert Khuzami, director of the SEC's Division of Enforcement, in a statement.
Among the improper accounting transactions listed in the complaint were sham reinsurance transactions as well as dealings with a shell company to conceal multi-million dollar underwriting losses.
The company was also charged with "economically senseless" transactions aimed at inflating investment gains and the sale of tax exempt municipal bonds to improperly report capital gains.
Greenberg, 83, relinquished his post as AIG's chief executive in 2005 amid a probe by then-New York Attorney General Eliot Spitzer for accounting fraud. The following year, the SEC charged AIG with securities fraud and improper accounting. The company settled the charges by repaying $700 million plus a fine of $100 million.
Greenberg is currently chairman and chief executive of privately-held insurance and investment firm C.V. Starr, which released a statement on his behalf.
"Mr. 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," said C.V. Starr. "With these issues behind him, Mr. Greenberg looks forward to being able to concentrate on building for the future."
For his part, Smith had planned to challenge the allegations in court, according to a statement issued by his attorney, Vincent Sama of Winston & Strawn LLP in New York.
"Although Mr. Smith was originally inclined to litigate this matter, resolving the SEC matter allows him to move forward with his life without the added legal costs and distraction of this lawsuit," Sama said.
AIG was brought to the brink of collapse last year amid towering losses related to insurance products the company sold to investors with souring mortgage-backed investments.