Regulators are scheduled to interview Greenberg and Berkshire Hathaway Chairman Warren E. Buffett, a longtime Washington Post Co. board member, in April. Buffett is being treated as a witness, not a target, in the investigation, according to a spokesman for Spitzer.
The contested transaction had the effect of boosting the reported size of AIG's reserves for insurance claims when investors were asking if the reserves were too small. The transaction was structured to make it appear that General Re was paying AIG to share some of its claim risk, but AIG said in a statement Wednesday that its investigators had found no "evidence of risk transfer."
Essentially, Sharav said, the deal was "economic engineering to prettify the financial statements. This is a big no-no."
AIG stock is part of the Dow Jones industrial average and is widely held by mutual funds and closely watched by investors. The company had a longtime reputation for solid growth and reliable results despite being in an industry that was inherently volatile.
Now the company has warned that at least some of its recent reliability was based on a series of "transactions which appear to have been structured for the sole or primary purpose of accomplishing a desired accounting result."
Three of the issues involve offshore insurance issuers that AIG previously treated as separate companies and may have used to shift liabilities and losses off its books. Regulators have been scrutinizing related entities particularly closely since Enron hid billions of dollars in losses that way.
According to AIG:
• Barbados-based Union Excess Reinsurance Co. does business almost exclusively with AIG, and its shareholders are entwined with a holding company that owns 12 percent of AIG and has a board made up of current and former AIG executives. If AIG is required to consolidate Union's liabilities with its own, it could cut shareholder equity by $1.1 billion, the firm said.
• There is "previously undisclosed evidence" that AIG controls Bermuda-based Richmond Insurance Co. Adding Richmond to AIG's results would have a minimal effect on the bottom line, the company said.
• AIG engaged in improper transactions with Barbados-based Capco Reinsurance Co. Ltd. that had the effect of reclassifying $200 million in operating losses from its automobile insurance business as capital losses. Investors tend to pay more attention to operating losses, analysts said.
