The troubles continue at American International Group Inc.
On Sunday, AIG president and chief executive officer Martin J. Sullivan sent a letter to shareholders, assuring them that AIG’s “unique global franchise is sound, our financial position is solid, and cash flow remains strong.”
In the letter, however, Sullivan noted that AIG management recently uncovered an attempt to remove documents and information from the insurer’s Bermuda building without AIG’s permission. Sullivan, who assumed the top post on March 14 following the ouster of Maurice Greenberg, went on to assert: “AIG immediately brought these incidents to the attention of the relevant authorities.”
The AIG CEO also wrote that the insurance giant has been cooperating with the New York Attorney General and the Securities and Exchange Commission “with regard to document security in New York, Bermuda, Ireland, and other locations.” In the note, Sullivan also reiterated his pledge to fire any employee who does not cooperate with the company’s internal review and external investigations.
Meanwhile, Bloomberg is reporting that former AIG chairman Greenberg offered to cut AIG’s ties with two companies he controls, Starr International Co and C.V. Starr & Co. Starr International controls about 12 percent of AIG’s stock. Reportedly, the two operations have awarded hundreds of millions of dollars in compensation to AIG management since 1975 without board oversight.
The reported sale of C.V. Starr, an insurance agency that does business with AIG, would end all ties between Greenberg and AIG. During his 37 years there, Greenberg transformed the small carrier into the world’s largest insurance company. But recent revelations about government probes into dubious accounting practices at AIG have rocked the one-time high-flyer.
“There’s going to be substantial pressure as part of the regulatory cleanup process to unwind these entities,” Patrick McGurn, executive vice president of Institutional Shareholder Services, told Bloomberg. “It’s a textbook case of conflict of interest.” As of presstime, an AIG spokesperson had not responded to a CFO.com request for comment.
Last week, AIG management admitted it may have overstated the company’s net worth by as much as $1.7 billion. About $1.1 billion of that stems from an incorrect accounting treatment of reinsurance arrangements with Union Excess over the past 14 years.