BUSINESSMAN MAURICE “Hank” Greenberg, one of the foremost figures in American commerce, has agreed to pay $15 million (€10.45 billion) to settle US government claims that he fraudulently boosted the earnings of insurance giant AIG.
Some of the bogus deals were routed through a firm based in the Irish Financial Services Centre, the US Securities and Exchange Commission (SEC) said.
Mr Greenberg, a former AIG chief executive, and the company’s former chief financial officer, Howard Smith, are the latest casualties of a long-running investigation into AIG’s links with reinsurance business GenRe, a unit of Warren Buffett’s Berkshire Hathaway group.
Initiated by former New York attorney general Eliot Spitzer, the inquiry has already resulted in the imprisonment of five US executives from AIG and GenRe.
Their convictions were secured partly on foot of testimony from Dublin-based John Houldsworth, the former chief of GenRe’s Dublin unit, CologneRe, whose “exceptional” co-operation with prosecutors spared him a prison sentence for his role in the scheme.
In a US court in June, he was sentenced to two years’ probation and fined $5,000.
CologneRe was a prime participant in a “sham” scheme to inflate AIG’s reserves by $500 million.
The SEC complaint said Mr Greenberg publicly described AIG as the leader in the insurance and financial services industry with a history of delivering consistent double-digit growth.
“However, AIG faced numerous financial challenges under Mr Greenberg’s leadership that were disguised through improper accounting,” the SEC said.
In a statement issued after his settlement was reached, Mr Greenberg said he did not admit any of the SEC’s claims except that he was the chief executive of AIG “at the time of the accounting issue”.
Mr Smith, in a statement issued by his lawyer, said he was initially inclined to fight the allegations but decided to settle the matter, enabling him to “move forward with his life without the added legal costs and distraction of this lawsuit”.
Robert Khuzami, director of the SEC’s enforcement division, 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.”
He went to say that “Greenberg and Smith oversaw various improper transactions that presented a false financial picture and allowed AIG to claim success in meeting its performance goals”.
The SEC complaint against Mr Greenberg, filed in a US district court for the southern district of New York, specifically named CologneRe as a participant in deals that made it appear that AIG had legitimately increased its general loss reserves.
