The New York Attorney General’s office today announced $9.9 million in settlements with former American International Group’s chairman Maurice Greenberg and its former CFO Howard Smith over accounting fraud at the insurance giant dating back to early 1990s.
Both Greenberg, 92, and Smith settled the charges against them and agreed to pay disgorgement and penalties to the State of New York, totalling $9.0 million and $900,000 respectively.
Former AIG executives were named defendants in a case involving engineering a half-billion dollar transaction with Berkshire Hathaway Inc. subsidiary General Re Corp to inflate the company’s reserves. The lawsuit also claims that Greenberg, who was ousted from AIG in 2005, designed another roughly $200 million transaction to hide the insurer’s multi-million underwriting losses from the auto-warranty program.
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Today’s accord resolves the last piece of litigation over the improper accounting against Greenberg and Smith who have agreed to return the $9.9 million bonuses they received between 2001 and 2004.
The case was originally filed by New York Attorney General Eliot Spitzer in 2005 and then continued by Attorney General Eric Schneiderman. However, it did not go to trial for more than a decade, due to legal wrangling that twice made it to the Court of Appeals, the state’s highest court.
Greenberg led AIG for four decades before he resigned in 2005. A few months later, the insurance giant paid more than $1.50 billion to settle federal and state probes into its business practices.