AIG fires top executives as fraud inquiries intensify

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The Independent Online

American International Group, the world's largest insurer which is struggling under multiple regulatory investigations, has fired two senior executives for failing to co-operate with government investigators.

American International Group, the world's largest insurer which is struggling under multiple regulatory investigations, has fired two senior executives for failing to co-operate with government investigators.

Howard Smith, the chief financial officer, who joined AIG two decades ago, and a vice president, Christian Milton, were sacked on Monday, the company confirmed yesterday.

The move came after the two signalled they would invoke their Fifth Amendment right not to incriminate themselves in investigations by several government bodies into AIG's business methods.

The high-profile firings also follow AIG's surprise announcement that Hank Greenberg, its authoritarian chief executive of almost 40 years, would step down from the day-to-day running of the company. Mr Greenberg, 79, is now non-executive chairman.

The insurance giant is under investigation by the New York attorney general, Eliot Spitzer, the Securities and Exchange Commission and the Department of Justice over allegations it massaged its figures.

Regulators are considering whether at least one substantial contract it entered into with General Re, which is owned by Warren Buffett's Berkshire Hathaway, was in fact a loan to AIG rather than a reinsurance contract. AIG was also named in Mr Spitzer's lawsuit against the broker Marsh & McLennan over illegal commissions. Two AIG employees have so far pleaded guilty in the ongoing investigation of fraud and bid rigging.

The New York-based insurer, whose shares have lost almost 25 per cent of their value in the past year, attempted to restore investors' confidence by saying it would co-operate fully with all of the investigations.

A spokesperson for AIG said Mr Smith and Mr Milton were ousted because they were breaking company policy "that requires employees to co-operate with government authorities on matters pertaining to the company".

Both of the senior executives were likely to have been familiar with the transaction with General Re which regulators are now investigating, The Wall Street Journal said yesterday. Mr Greenberg has also personally received a subpoena about his involvement in the deal.

Mr Smith and Mr Milton may wish to be as co-operative as possible with investigators to mitigate their own possible punishments. That could incriminate others at AIG. It is possible that Mr Greenberg himself will face a criminal prosecution if regulators find he set up the deal with General Re in bad faith.

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