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Greenberg Pays $15m In Sec Settlement

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Hank Greenberg, the former chairman of American International Group, on Thursday agreed to pay $15m to settle the US Securities and Exchange Commission’s investigation into his role in accounting fraud at the company from 2000 to 2005.

The settlement focuses on Mr Greenberg’s alleged involvement in “numerous improper accounting transactions†that inflated AIG’s results. The SEC said these included sham transactions with General Re, the reinsurance company, use of an offshore entity to conceal auto insurance losses and shifting money around to report investment gains.

AIG ousted Mr Greenberg in 2005 during the investigation of the transactions and later paid $1.6bn to settle with the SEC and the New York attorney-general.

In a statement, Mr Greenberg said he “appreciates the SEC’s recognition that he personally should not be charged with any fraudâ€. He added that he was “pleased to finally put these issues behind him and be able to concentrate on building for the futureâ€.

Howard Smith, former AIG vice-chairman and chief financial officer, settled with the SEC for $1.5m. The complaint said he “knew or recklessly disregarded that AIG’s accounting was not in conformityâ€.

Andrew Lawler, Mr Smith’s lawyer, said that, although he was initially planning to fight the allegations, “resolving the SEC matter allows him to move forward with his lifeâ€.

The case comes in a week in which a newly aggressive SEC has agreed settlements with General Electric over accounting fraud and Bank of America over the failure to disclose during its merger with Merrill Lynch that bonuses would be paid to Merrill bankers.

“Corporate leaders cannot avoid the truth and consequences of their companies’ performance by using improper accounting gimmicks and signing off on distorted financial reports,†said Robert Khuzami, SEC enforcement director.

But there are questions over whether the SEC is giving up too much in its effort to nail big corporate names. A federal judge on Wednesday refused to approve the BofA deal, saying he wanted to know more about who was responsible.

“There is a lot of pressure from on high at the SEC for quick settlements to prove that the SEC is the cop on the beat. You want settlements, but you also want transparency,†said John Coffee, Columbia University law professor.

Five people have been convicted of criminal fraud for AIG’s transactions with Gen Re, including Ronald Ferguson, the reinsurer’s former chief executive. The SEC complaint said Mr Greenberg personally telephoned Mr Ferguson to initiate the transactions which boosted AIG’s reported loss reserves by $500m, at a time when analysts were concerned about the issue.

Mr Greenberg, 84, was not charged in the criminal case. Since leaving AIG, he has headed CV Starr, an insurance and investment company named after AIG’s founder. Mr Greenberg has continued to cultivate his long-standing relationships with governments and regulators around the world. He has also been a vocal critic of the government’s handling of AIG’s near-collapse and of the insurer’s management

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