AIG

Which you can read here, and the stock was tanking, guess what AIG execs were up to.

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ABC News just had the report on their World News Tonight show.

 

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In the flurry of financial crisis stories, the media has neglected to mention the recent conviction of an AIG executive for accounting fraud. The crime is for "side letters" - much like the off-book arrangements that figured centrally in the Enron debacle. Cross-posted at Daily Kos Reuters, 9/5/08:

The defendants were convicted (this past Feburary) in connection with a reinsurance deal that prosecutors said misled AIG investors because it enabled the company to improperly inflate its loss reserves, painting an artificially bright picture of its financial results. AIG previously acknowledged accounting improprieties and restated $3.8 billion in earnings from 2000 through 2004 and agreed to a $1.64 billion regulatory settlement in 2006.

It’s good to know that someone bearing responsibility for this mess is going to jail. The AIG failure is probably the result of ginormous fraud schemes, with the bursting subprime mortgage bubble only a contributing factor. It defies credulity that over a trillion in assets reported earlier this year were all wiped out by the mortgage mess, given the regulations governing investment of insurance company assets. There's more to the story. There was a sentencing hearing early this month in Connecticut, where the case was tried. From Bloomberg News 9/6/08:

The executives were convicted for using a sham transaction in 2000 to help AIG add $500 million in loss reserves, a key indicator of an insurer's health. Jurors convicted Ferguson, 66; Monrad, 53; Garand, 61, a former senior vice president; Graham, 60, a former General Re assistant general counsel; and Christian Milton, 60, AIG's former head of reinsurance.

Back to Reuters (linked above)::

In a sentencing memorandum filed late on Friday, prosecutors argued that sentences for the five defendants should be stiffer than the range of 168 months to 210 months calculated in a pre-sentence report. The government also said losses to AIG investors could be estimated at more than $400 million -- with the government's expert calculating fraud-related losses as much as $1.4 billion -- a factor that should enhance the defendants' sentences.

International Herald Tribune, 9/12/08:

The former officers were accused of breaching fiduciary duties by redirecting insurance business that generated hundreds of millions of dollars in commissions to another company they controlled. Simultaneously, Maurice Greenberg, AIG's former chief executive and one of the former officers, began the first of what is expected to be three grueling days of depositions in a civil lawsuit brought against him by the office of the New York State attorney general, Andrew Cuomo. The lawsuit accuses Greenberg of devising transactions to make AIG's financial condition look stronger. AIG's board removed Greenberg in 2005, after regulators served AIG with subpoenas.

In an extraordinarily important article today The Constitutional Moment Arrives, Stirling Newberry observes that

The key question is this: the American tax payers just bought the banking system. We are going to pay, with interest, upwards of three trillion dollars for it. A relative bargain actually. The question is what we are going to do with it now that we own it.

This link goes to a picture by Rembrandt. Bail’em and His Ass