AIG pays $1bn to settle with Spitzer

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The Independent Online

American International Group, the scandal-hit insurer, is close to agreeing a deal to hand over more than $1bn (£563m) to put an end to various government investigations which have rocked the company in the past year.

An 11-month investigation by Eliot Spitzer, the New York attorney general, and the Securities and Exchange Commission has wiped out $59bn of AIG's market value and ended the 38-year reign of itsformer chairman and chief executive, Hank Greenberg.

A settlement would resolve a lawsuit launched last May by Mr Spitzer accusing AIG, the world's largest insurer, of using sham reinsurance contracts and other transactions to understate liabilities from claims and hide losses.

The SEC, which has not sued AIG but has investigated its activities, would probably file a claim and settle it on the day as part of the deal. In the wake of the investigations, AIG has retrospectively slashed profits it booked between 2000 and 2004 by almost 10 per cent. It blamed Mr Greenberg and Howard Smith, AIG's former chief financial officer, for the inflated figures, saying they circumvented the company's regulatory controls. Mr Greenberg, 80, has said the company's restatements were unnecessary and driven by fear. He stepped down in March.

"AIG's rush to concede wrongdoing may be explained in part by the regulatory environment," Mr Greenberg's lawyers said to US regulators in July. "Many of the restatement items appear exaggerated and unnecessary."

The possible settlement with regulators, reported by The Wall Street Journal, would not include a deal with Mr Greenberg. Mr Greenberg, who built up AIG into an international company, has said he did nothing wrong and is fighting Mr Spitzer's allegations.

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