AIG wrongly inflated its $3.9 billion accounts restatement by as much as $1.5 billion, according to analysis being conducted by advisers to Maurice “Hank” Greenberg, the insurance group’s former chief executive, who is under investigation for alleged accounting abuses.
It is understood that Mr Greenberg’s lawyers and accountants are preparing to tear apart the earnings restatement made last month by AIG as the main plank in his defence of a lawsuit filed by Eliot Spitzer, the New York attorney-general. Mr Spitzer claims that Mr Greenberg was behind a series of unorthodox insurance policies designed to inflate falsely AIG’s bottom line. The lawsuit claims that allegedly shady insurance companies in Bermuda were subsidiaries of AIG used to cloud its real financial health. The finances of Union Excess, one of the companies, are understood to lie at the centre of Mr Greenberg’s defence.
On May 31 AIG restated the amount of shareholders’ equity on its books by $2.6 billion. The company also lowered its 2004 profits by $1.3 billion, making a $3.9 billion total restatement. Union Excess’s accounts were brought under the umbrella of AIG’s books as part of the restatement and make up about $1.5 billion of the shareholders’ equity restatement, according to sources. The Union Excess finances were brought into the AIG fold because investigators told the company that they believed the two to be linked.
AIG complied with the request, but Mr Greenberg maintains that AIG and Union Excess are separate companies and that their finances should be kept apart. “No evidence has been presented to show that Union Excess and AIG were linked,” a source close to Mr Greenberg said.
Neither AIG, Mr Greenberg nor Mr Spitzer would comment.