Risk Management

FBI Probing Insurance Industry

In prior corporate fraud cases, says an FBI assistant director, the bureau found that more than one company in an industry is usually involved in t...
Stephen TaubMay 5, 2005

The Federal Bureau of Investigation has launched a probe of accounting practices in the insurance industry that could extend to other financial-services businesses, according to The Wall Street Journal.

Citing people familiar with the matter, the paper reported that FBI investigators are meeting in New York today with insurance regulators from a number of states, who are expected to explain how complex transactions are structured and can be used to manipulate financial statements.

The probe, which includes between 50 and 75 FBI agents, stems from the accounting scandal at American International Group Inc. The giant insurer is already being investigated by New York attorney general Eliot Spitzer, the Securities and Exchange Commission, the Department of Justice, and the New York Insurance Department. The FBI agents, who operate within the bureau’s Financial Crimes Section, were also involved in the fraud investigations of Enron and WorldCom, the paper noted.

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“We have a very wary eye on the insurance industry because of AIG,” Chris Swecker, assistant director of the bureau’s criminal investigative division, told a media briefing on financial crimes, according to the Journal. In prior corporate fraud cases, he noted, the FBI found that more than one company in an industry is usually involved in the malfeasance. “If one was doing it, others had to stay competitive,” Swecker reportedly stated.

“I’m not going to say this is the next crisis,” he also told reporters, according to Reuters. But pointing to past scandals like the savings-and-loan crisis in the late 1980s and the corporate fraud crisis in late 2001 and 2002, he stressed that the FBI did not want to be “caught napping” if insurance-related corporate fraud turned out to be the next big issue.