<< Back
PDF Version

NEW YORK, Nov 30, 2004-- American International Group, Inc. (AIG) announced today that AIG and its subsidiary AIG Financial Products Corp. (AIGFP) have reached a final settlement with the Securities and Exchange Commission (SEC), the Fraud Section of the United States Department of Justice (DOJ), and the United States Attorney for the Southern District of Indiana with respect to issues arising from certain structured transactions with Brightpoint, Inc., The PNC Financial Services Group, Inc. (PNC) and related matters.

As detailed in an AIG news release on November 24, 2004, the agreement with the SEC, under which AIG does not admit or deny any wrongdoing, will fully resolve all government claims against AIG and its subsidiaries regarding the transactions and related public statements and press releases. Pursuant to the agreement, AIG will pay into an SEC disgorgement fund approximately $46 million in fees (and interest on the fees) on the PNC transactions, which were structured by AIGFP. In addition, AIG is enjoined from future violations of certain provisions of the federal securities laws. The Brightpoint transaction, which was underwritten by the Loss Mitigation Unit of the National Union Fire Insurance Company of Pittsburgh, Pa., was settled with the SEC in 2003. The settlement includes the appointment of an independent consultant who will review certain transactions entered into between 2000 and 2004 to determine whether the transactions were used by a counterparty to violate GAAP or obtain a specified accounting or reporting result. The settlement also requires AIG to establish a transaction review committee. The independent consultant will review the policies and procedures of the transaction review committee.

AIGFP will pay a penalty of $80 million to the DOJ. The proposed settlement with the DOJ consists of an agreement with respect to AIG and AIGFP and a complaint and deferred prosecution agreement with AIGFP PAGIC Equity Holding Corp. (PAGIC) that will foreclose future prosecutions in connection with the PNC and Brightpoint transactions, provided that the companies comply with the agreements. AIGFP has also agreed to a statement of facts describing its conduct.

AIG Chairman M. R. Greenberg said, "This comprehensive settlement brings finality to the claims raised by the SEC and the Department of Justice. The role of the independent consultant complements our own transaction review processes. We welcome this enhancement to our overall risk management and control mechanisms.

"We have always sought to adhere to the highest ethical standards and ensure that we are in compliance with the applicable laws and regulations that govern our businesses around the world. As part of this effort we regularly review our compliance policies and procedures and take additional action whenever appropriate to enhance them.

"In anticipation of this settlement, AIG has been forming a Complex Structured Finance Transaction Committee comprised of senior executives from the business and from the Finance, Legal and Claims functions. The committee, which is chaired by Bob Lewis, AIG Senior Vice President and Chief Risk Officer, will submit an account of its proceedings on a regular basis to the Audit Committee of the Board of Directors and me. This Committee will help assure that no product we market in any part of our organization is sold to assist a counterparty or an insured to misrepresent either its income statement or balance sheet. The Enterprise Risk Management area, headed by Mr. Lewis, is helping to enhance the processes we have in place to ensure that we have adequate policies, procedures and controls to protect the organization.

"Since April, AIG Financial Products Corp. has had its own Transaction Review Committee, which is comprised of Joe Cassano, the CEO of AIGFP, and senior executives from AIGFP's business, legal, finance, and risk-management groups. Among other responsibilities, the job of this Committee is to assure that AIGFP's structured finance transactions comply with applicable regulatory and accounting standards and that an appropriate assessment is given to any reputational risks from these transactions. The results of the Committee's deliberations will be reported to Edward E. Matthews, the Chairman of the Board of AIGFP. In addition, Frank Zarb, Chairman of the Executive Committee of the AIG Board of Directors and John M. "Neel" Foster, a former Board member of the Financial Accounting Standards Board, have joined the Board of Directors of AIGFP.

"We are augmenting on a worldwide basis in several different languages our ethics education program. The program reinforces the standards set forth in our Code of Conduct, which is distributed in every part of AIG around the world in seven languages.

"We have recently named Mari Maloney as AIG's Chief Compliance Officer. She is responsible for overseeing AIG member companies' compliance with laws and regulations and AIG's own compliance policies. In this role, she has the support of 250 compliance officers around the world and the authority to increase staff as necessary to implement her responsibilities. She reports to me, the General Counsel and the Audit Committee of the Board of Directors. Prior to joining AIG, Ms. Maloney was a senior Department of Enforcement attorney at NASD and prior to that an Assistant District Attorney at the Manhattan District Attorney's office.

"Employees who have compliance questions or concerns or have a violation to report have a Compliance Help Line they can contact. Translators are available in more than 70 languages for those employees who need assistance. Employees who wish to remain anonymous may do so.

"I am proud of the more than 90,000 people of AIG and our long history of serving customers and shareholders ably and honorably. We are a very large organization, and we have been growing rapidly, so I believe it is appropriate for us to take these additional steps reviewing and enhancing the policies and procedures we have in place, and benefiting from the expertise of independent experts."

Copies of the relevant SEC and Department of Justice Settlement documents will be posted at: http://www.corporate-ir.net/media_files/nys/aig/sec.htm

This press release may contain forward-looking statements. Please refer to the AIG Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 and AIG's past and future filings and reports filed with the Securities and Exchange Commission for a description of the business environment in which AIG operates and the important factors that may affect its business. AIG is not under any obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

American International Group, Inc. (AIG) is the world's leading international insurance and financial services organization, with operations in more than 130 countries and jurisdictions. AIG member companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In the United States, AIG companies are the largest underwriters of commercial and industrial insurance and AIG American General is a top-ranked life insurer. AIG's global businesses also include retirement services, financial services and asset management. AIG's financial services businesses include aircraft leasing, financial products, trading and market making. AIG's growing global consumer finance business is led in the United States by American General Finance. AIG also has one of the largest U.S. retirement services businesses through AIG SunAmerica and AIG VALIC, and is a leader in asset management for the individual and institutional markets, with specialized investment management capabilities in equities, fixed income, alternative investments and real estate. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.

SOURCE: American International Group, Inc.

American International Group, Inc.
Charlene Hamrah (Investment Community)
Joe Norton (News Media)