Land of Enchantment's blog

AIG Executive to be Sentenced for Fraud Conviction

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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.

South Texas Hornet's Nest

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Hispanic voters along the Rio Grande are one of the hotly contested demographics in next month's primary in Texas. People along the border are hopping mad about Homeland Security's plans to bulldoze their homes and land to put up the border wall.

But the 72-year-old nursing professor has a message for any government officials who expect her to leave quietly. "I'm not going down without a fight," Tamez said, her dark eyes narrowing as she gazed beyond her back yard toward a field where she used to pick tomatoes as a child. "My father, my grandfather and my great-grandfather farmed this land. This is the land that gave me my life and my spirit. . . . I will fight this all the way."

And, if that's not enough, it now looks like the bulldozers are going to spare the wealthy and well-connected. The rest of the country sometimes seems ready to make a sacrifice zone of the Rio Grande, but the residents have a different idea. It will be interesting to see how the upcoming primary plays out against this backdrop.

This isn't a new story. My first diary (of several) on the subject was nearly two years ago, and USA Today did a substantial story in November 2006:

EAGLE PASS, Texas — Ranching magnate Bill Moody's vast holdings spread across three Texas counties and include 35 miles of frontage along the Rio Grande, where thousands of illegal immigrants and smugglers have crossed from Mexico into the USA. They have worn paths through Moody's pastures, cut his fences and stolen some of his cattle.

CA-04: Richard Pombo Thinks Doolittle is too Corrupt!!!

Former Congressman Richard Pombo is alleged to be urging John Doolittle (CA-04) not to stand for re-election. For the good of the Republican party. At first blush, this sounds like something from The Onion. But it's not - it's from that Washington insider paper, The Hill:

According to three well-placed Republican sources, former Representative Richard Pombo (R-CA) — who lost his seat amid ethics allegations — has called on longtime friend Doolittle to not seek reelection in the interest of keeping the district a GOP stronghold. In the last Congress, Pombo was a panel chairman while Doolittle was a member of GOP leadership.