AIG to pay $10m to settle SEC fraud case
By Adrian Michaels in New York (来源：英语学习门户网站EnglishCN.com)
AIG, the world's largest insurance company, has agreed to pay $10m to settle allegations that it had helped a client perpetrate accounting fraud.
The Securities and Exchange Commission, the US's chief financial regulator, accused AIG and Brightpoint, a wireless telecoms company, of concocting a scheme to smooth earnings in contravention of accounting principles.
Brightpoint, which was facing losses from UK operations greater than it had anticipated and had announced to investors, approached AIG, the SEC said.
The two companies then produced and backdated an insurance policy that would allow Brightpoint to say it was expecting a pay-out to cover some losses and hence keep them within a pre-announced range.
But, the SEC said, AIG was merely acting as a holder of deposits for Brightpoint's insurance premiums, agreeing that it would later give them back as insurance pay-outs. As is usual with the SEC's civil cases, AIG and Brightpoint neither admitted nor denied the allegations.
Stephen Cutler, head of enforcement at the SEC, said: “This case shows that the commission will pursue insurance companies and other financial institutions that market or sell so-called financial products that are, in reality, just vehicles to commit financial fraud.”
The case follows action by the SEC against Merrill Lynch, Citigroup and JP Morgan Chase for allegedly helping Enron commit fraud.
AIG acknowledged in a statement “that mistakes were made in the underwriting of this policy. Consistent with its longstanding commitment to ensure that it has sound and effective internal controls, AIG has taken steps to correct those mistakes.”
Embarrassingly for the insurance company, the SEC said the $10m penalty also reflected misconduct during the investigation. “AIG failed to produce a large quantity of documents...In part, this failure resulted from a woefully deficient document collection effort within AIG,” the SEC said.
AIG consented to retain an independent consultant to make recommendations to ensure that its products “will not be used in the future to violate the securities laws”.
The SEC said Brightpoint reduced a $29m loss by $11.9m with AIG's help. The company's 1998 annual financial report therefore overstated net income before tax by 61 per cent.
The SEC said that Brightpoint conspired with AIG to make sure the scheme would not raise “red flags” with outside auditors.
Although the insurance policy was not agreed until January 1999, it was dated August 1998. “It was merely a ‘round-trip' of cash - a mechanism for Brightpoint to deposit money with AIG, in the form of monthly ‘premiums', which AIG was then to refund to Brightpoint as purported ‘insurance claim payments',” the SEC said.
Brightpoint agreed to pay a civil penalty of $450,000. Jerre Stead, Brightpoint's lead independent director, said: “Brightpoint has instituted best practices in corporate governance and adopted strict internal controls, which are designed to avoid these types of issues in the future.”