Transcripts

AIG Pays $1.6B To Settle Scandal

SUSIE GHARIB: AIG agreed today to pay big bucks to put its legal troubles behind it. The insurance giant will pay $1.6 billion to settle state and Federal regulators to settle charges of fraud, bid-rigging and improper accounting. Excluded from the settlement, AIG`s former powerful CEO Hank Greenberg. Stephanie Dhue reports.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The settlement closes a civil lawsuit and a sweeping investigation of AIG by the Securities and Exchange Commission, the Justice Department, the New York insurance department and the New York attorney general.

ELIOT SPITZER, NEW YORK STATE ATTORNEY GENERAL: From the highest levels of AIG, there was an intent to misrepresent the financial condition of the company. There were transactions entered into that were false, flagrant violations of state and Federal law designed to misrepresent the financial condition of that company.

DHUE: SEC enforcement Director Linda Thomsen says other charges may still be filed.

LINDA THOMSEN, ENFORCEMENT DIRECTOR, SEC: Our investigation is continuing as to other individuals and entities that may have played a role in these particular transactions and also our sort of broader investigation of insurance and reinsurance products is continuing as well.

DHUE: The settlement does not cover former AIG CEO Hank Greenberg, who is still facing a civil suit in New York. From the $1.6 billion settlement, half -- $800 million -- will go to a restitution fund for AIG shareholders misled by the company`s accounting; $375 million dollars is set aside for AIG policyholders harmed by bid-rigging; $344 million will go to states hurt by AIG`s practice of understating workers` compensation premiums; $100 million will go to New York State and $25 million goes to the Justice Department. In a statement, AIG CEO Martin Sullivan said these settlements are a major step forward in resolving the legal and regulatory issues facing AIG. And it has already implemented a wide range of improvements in our accounting, financial reporting and corporate governance. Analyst Clifford Gallant, whose firm does investment banking business for AIG and who owns or has a family member who owns its stock, says the settlement avoids a criminal charge that would cripple the company.

CLIFFORD GALLANT, INSURANCE ANALYST, KEEFE, BRUYETTE & WOODS: You`ve had a lot of uncertainty at the company, a lot of challenges, a lot of internal looking by everyone there and now I think they`re moving past that. So the settlement I think puts a period at the end of these problems and they can look forward to a better future.

DHUE: But the government investigation will still be a part of AIG`s future. The company says it will cooperate in that probe and will continue to work to give investors a clearer picture of its business dealings in the future. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.