Former AIG Chief to Pay $15 Million to Settle SEC Charges

Former American International Group chief executive Maurice R. "Hank" Greenberg has agreed to pay $15 million to settle allegations by the Securities and Exchange Commission that he oversaw numerous improper accounting deals that for years deceptively inflated the insurance giant's bottom line.

In a civil complaint filed with a federal court in New York, the SEC charged that Greenberg and former chief financial officer Howard Smith created the false impression that AIG was consistently meeting or exceeding lofty earnings and growth targets from 2000 through 2005.

"Greenberg and Smith oversaw various improper transactions that presented a false financial picture and allowed AIG to claim success in meeting its performance goals," Robert Khuzami, director of the SEC's enforcement division, said in a statement Thursday announcing the agreement.

The agency claimed that the two men were responsible for a series of sham insurance transactions that made it appear that AIG had legitimately bolstered its loss reserves, as well as efforts to mask losses by using offshore shell entities. The SEC accused Greenberg and Smith of making "false and misleading public statements" and "material omissions in quarterly reports," news releases and investor calls.

Greenberg, 84, headed AIG for nearly four decades and built it into one of the world's largest and most revered insurance companies, operating in more than 130 countries. But he was forced to step down in 2005 amid an accounting scandal that led to multiple state and federal investigations. After his departure, AIG was forced to restate years worth of earnings and pay hefty settlements to investigators.

Greenberg has consistently denied allegations that he acted unlawfully, and even as he agreed Thursday to the settlement, he neither admitted nor denied wrongdoing.

"Mr. Greenberg appreciates the SEC's recognition that he personally should not be charged with any fraud," said a statement issued on behalf of Greenberg's investment fund, C.V. Starr & Co. "With these issues behind him, Mr. Greenberg looks forward to being able to concentrate on building for the future."

Smith, who also was ousted during the 2005 accounting scandal, agreed to pay a $1.5 million fine. He also will be prohibited from acting as an officer or director of any public company for three years, according to the SEC.

An attorney for Smith issued a statement noting that some of the transactions in the SEC complaint were nearly a decade old. "Although Mr. Smith was originally inclined to litigate this matter," he said, "resolving the SEC matter allows him to move forward with his life without the added legal costs and distraction of this lawsuit."

AIG officials declined to comment on the charges.