AIG ..criminal indictments?

[Miklos Vasarhelyi <miklosv@andromeda.rutgers.edu>]

Jury considers AIG criminal indictments

Fri May 20,
3:39 PM ET 

A New York grand jury is investigating possible criminal conduct by
individuals at insurance company American International Group Inc.
(NYSE:AIG - news), according to news reports on Friday.

New York Attorney General Eliot Spitzer is giving evidence that may
result in indictments of one or more individuals, Bloomberg News and the
Wall Street Journal said, citing unnamed sources. Spitzer's office
declined to comment on the report.

Company shares rose 1.6 percent on the reports as investors interpreted
them to mean the company was beginning to emerge from several months of
bad news.

The world's largest insurer by market value on May 1 detailed a lengthy
list of accounting and other improprieties that forced it to delay the
filing of its 2004 annual report with the U.S. Securities and Exchange
Commission for a third time.

It also cut its net worth by $2.7 billion, or 3.3 percent, and said it
will restate financial reports from 2000 through the third quarter of
2004.

The company is under investigation by Spitzer, the U.S. Securities and
Exchange Commission and other authorities trying to understand how and
why it mishandled its accounting.

Spitzer said in early April a civil resolution could be worked out with
the insurance company, implying an indictment of the entire company was
not forthcoming. A source said on Friday a civil complaint was being put
together against AIG.

AIG Senior Vice President Joseph Umansky has testified in exchange for
immunity from charges possibly resulting from the proceedings, Bloomberg
said. Umansky's lawyer could not be reached for comment.

An AIG representative declined to comment.

Grand jury proceedings are secret.

Despite the reports, AIG shares rose as investors snapped them up,
thinking several months of bad news may be coming to an end and that AIG
has "reached the bottom of the scandal cycle," according to
Wayne Bopp, a financial services analyst with Fifth Third Investment
Advisors in Ohio.

Shares of AIG rose 85 cents, to $53.85, in late afternoon trading on the
New York Stock Exchange. 

Copyright © 20

Miklos A. Vasarhelyi
KPMG Professor of AIS
Rutgers University
Director Rutgers Accounting Research Center
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