A Spitzer spokesman declined to comment on specifics of
AIG's statement, but called it "a welcome step toward
transparency and accountability as our investigation proceeds."
In addressing its accounting problems, AIG is attempting to
restore credibility with investors who have watched the
examination of its deal with General Re spread into
investigations of dozens of questionable transactions.
AIG recently fired three executives for failing to
cooperate with authorities in their probes; has tightened
security at its office in Hamilton, Bermuda; and hired two
outside law firms to help with the investigation.
The company went even further on Wednesday, disclosing
possible accounting problems dating back to 1991 with the
formation of Union Excess Reinsurance Company, Ltd, a
supposedly unaffiliated reinsurer based in Barbados.
But Union Excess has reinsured risks "emanating primarily
or solely from AIG" since 1991 and instead of being independent
it could potentially be considered a "corporate entity" of AIG,
according to Wednesday's statement.
The issue: If Union Excess should have been treated as an
AIG unit, then AIG has overstated shareholder equity by $1.1
billion.
Two other reinsurers -- Richmond Insurance Co, Ltd., based
in Bermuda, and Capco Reinsurance Co., based in Barbados --
should also have been characterized as corporate entities when
it came to accounting for deals with them, AIG said.
"Certain but not all of the original characterizations
resulted from transactions which appear to have been structured
for the sole or primary purpose of accomplishing a desired
accounting result," AIG said, referring to its review.
The company, which said the review is continuing, also
disclosed it had looked into a series of transactions involving
call options it sold on bonds. What's more, AIG said it
couldtake a $300 million charge due to "the recoverability of
certain balances, consisting mainly of receivables."
Given its review and a management shuffle that included
Martin Sullivan replacing Greenberg as CEO, AIG now expects to
file its 10-K by April 30 -- originally due March 16.
AIG will also ask the SEC for permission to continue to
file registration statements that allow it to raise money by
offering securities to the public.
