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Friday May 27, 06:06
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AIG sued by Spitzer: Stock price rises
(by Julia Jenson)
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New York Attorney General Eliot Spitzer and Insurance Superintendent Howard Mills jointly filed a civil lawsuit against American International Group Inc., the world’s largest insurer, on charges of fraud and manipulating its accounting. The regulators accuse AIG of fraudulent business transactions that aimed at raising the value of the company’s stock.
In addition Ohio authorities filed suit against AIG’s once powerful boss Maurice "Hank" Greenberg who was ousted on the accounting scandal in the company.
’’The complaint went out of its way to document a central role for Mr. Greenberg and, to a lesser extent, Mr. Smith in AIG’s various accounting machinations," Donald Light, a senior analyst in the insurance group at consulting firm Celent Communications, said.
It is still too early to estimate the exact cost of compensation the US insurance giant might stand to lose in the probe, although analysts are talking about numbers close to $1 billion. Anyway, the suit will tell on the amount the company will be able to pay in compensation on insurance claims.
In a relief to investors that helped to boost AIG stock by 3%, Attorney General stopped short of filing a criminal suit against AIG. Besides, the suit focuses on the two former executives, Chief Executive Officer and Chief Financial Officer, and does not mention the current managment. Besides, AIG lays great hopes on its cooperation with the investigation.
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