The AIG Scandal Continues
AIG was founded in 1919 by Cornelius Vander Starr in Shanghai , China . Starr was the first Westerner in Shanghai to sell insurance to the Chinese.
AIG owns ILFC, the world's largest aircraft leasing company, with hundreds of aircraft from to Boeing 747-400 .
It also is the world's leading international insurance and financial services organization, with operations in more than 130 countries and jurisdictions.
AIG member companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer.
In the United States , AIG companies are the largest underwriters of commercial and industrial insurance and AIG American General is a top-ranked life insurer.
In November of 2004 the AIG scandal cost AIG a $US 126 million settlement with the SEC and the Justice Department that resolved the matter in part, but the insurer must still co-operate with investigators who are continuing their probe into the sale of a "non-traditional insurance product".
The settlement was related to a so called "finite insurance" product.
In 2005, after an AIG scandal on insurance and mutual funds the year before, AIG is under investigation for accounting fraud. The company already lost over $58 billion worth of market compensation because of the AIG scandal.
AIG has the fastest decrease in market value since the WorldCom and Enron scandals. Investigations also discovered over a billion US dollars worth of errors in accounting transactions.
One such error involves a supposedly $500 million transaction with Berkshire Hathaway that drastically inflated AIG's revenues. This error involved reinsurance transactions.
Reinsurance supposedly is used only for spreading out risk, but it may also be used for the questionable purpose of polishing a company's financial statements, in the same way the manner of accounting for revenue did for Enron.
In early May 2005, AIG restates financial statements, and issues a reduction in book value of USD $2.7 billion, a 3.3 percent reduction in net worth. AIG's share price falls due to conservative investors selling shares.
Future outcome for the company is still pending. The company has aggressively tried to increase shareholder confidence, replacing a significant part of the board of directors with more independent members.
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