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Transcript of AIG
Made about $4.3 billion worth of accounting errors in a matter of five years.
Hid losses and inflated net worth.
$3.3 billion made it look better and $1 billion that made it look worse.
took inflated fees from customers, set up reinsurance companies for them in Bermuda, and bought reinsurance from them, giving their clients tax-free cash in that offshore island.
Premiums were double the going rate. Accounting Fraud Blames Maurice Greenburg for most problems.
All accounting errors could go back a total of 14 years.
Improperly accounted the reinsurance transaction that should have been classified as a deposit not as insurance..
AIG booked $500 million as income
then added $500 million in reserves against future claims to its balance sheet.
But by recording the deal as “insurance,” AIG was able to effectively boost its loss reserves by $500 million.
Was fired in 2005 after being charges with fraudulent business practices, securities fraud and other violations.
Restated their financial position in may 2005. Bid Rigging Founded in 1919 by Cornelius Vander Star in China.
One of the worlds largest insurance and financial services companies.
Business was led by Maurice Greenburg, CEO.
Specialized in Auto Insurance, Life Insurance and Financial Services.
Company had around 93 000 employees.With business in over 130 countries.
In 2005, questions came up about financial transactions that were making the companies earnings look better.
Biggest federal bailout in American history. "As a global financial services organization, we have committed our resources to developing products and services that address the needs of our clients as well as promote a corporate culture that values integrity, diversity, innovation and excellence. " The Securities and Exchange Commission learned in 2001 that AIG helped a client company to enhance their balance sheet with a fake insurance transaction.
This starts an investigation.
The SEC and Justice Department in 2003 came to a settlement with AIG for a $10 million civil penalty.
In 2004 there was a further investigation and a bid rigging complaint filed against them.
In 2005, AIG admitted to improper accounting
$500 million transaction with Gen Re that inflated AIG's revenues.
Error involved reinsurance transactions. How many Accounting Errors? And more... And More... The Investors, Taxpayers and Public Who did it effect? in total had a $182 billion bailout from the United States
outraged the people who cause the collapse were receiving bonuses.
investors lost confidence
more than the U.S. population own stocks and other securities that reacted to the bailout.
Investors around the world lost stocks, money ect. * U.S. Banks and the Federal Reserve
* AIG investors; stockholders, bondholders etc.
* Mutual funds, ETF's, Market makers
* Competing company/industry investors
* International investors What Investors? Employees Employees and entire company received bonuses that could total $1.2 billion.
Began in March 2009.
Lost billions when the shares became worthless.
Lost some of their pension funds with the stocks. How could it of been prevented? This could have been avoided if the Federal Reserve had listened to uninterested advisers with a greater outlook of the public interest.
They believed they were "too big to fail".
AIG had a number of accounting errors, that there was too many to hide in the end.
All in all this was caused by greed, arrogance and ignorance and without all of that this scandal could have been prevented. Bid rigging is a form of fraud when a commercial contract is promised to one party even though for the sake of appearance several other parties also present a bid
Settlement for bid rigging required the company paid $36.8 million to clients that purchased business insurance from 1998 to 2004. When someone interferes with the free and fair operation of the market and create artificial, false or misleading appearances.
Maurice Greenburg directed AIG traders late in the day to buy shares to prop up its price.
by keeping the stocks at a high level, every pension fund that invested in equities was defrauded: equaling more than $1 billion.
In September 2008, AIG marketed off assets. Stock Manipulation How to Avoid it Sources http://topics.nytimes.com/top/news/business/companies/american_international_group/index.html