New York – In one of the largest regulatory settlements ever, American International Group Inc. has agreed to pay more than $1.6 billion to settle allegations that it used deceptive accounting practices to mislead investors and regulators.
The settlement announced today by New York Attorney General Eliot Spitzer’s office also requires the New York-based company, one of the world’s largest insurers, to adopt changes in its business practices to ensure proper accounting procedures in the future.
The pact settles a civil suit filed last May by Spitzer with backing from the New York State Insurance Department. The Securities and Exchange Commission, which also worked with Spitzer on the investigation, was to file and settle allegations of accounting fraud with the company simultaneously.
Spitzer spokesman Darren Dopp said the settlement was final.
Spitzer told The Associated Press in an interview, “This is a company that didn’t have to cheat. But once they began, they found it hard to stop. And like an addict, they grew dependent on financial gamesmanship that could ultimately destroy the company.” He said that the new business practices AIG was adopting would improve the market for property and casualty insurance in the United States.
“AIG’s obligation to be transparent, its obligation to report honest financials and its obligation to permit consumers to know what fees its agents and brokers will be deriving from sales, are going to define a new level of transparency in the market that all consumers will benefit from,” Spitzer said.
