Risk Management

Spitzer on AIG: We Call It ”Fraud”

To shed additional light on American International Group's transactions, federal and state regulators are interviewing Warren Buffett this morning.
Stephen TaubApril 11, 2005

New York Attorney General Eliot Spitzer has turned up the heat on American International Group and its former chairman Maurice “Hank” Greenberg.

Speaking on the Sunday television show “This Week,” Spitzer accused the executive who had built the largest insurance company of committing fraud. “That company was a black box run with an iron fist by a CEO who did not tell the public the truth,” said Spitzer, according to Reuters. “That is the problem.”

“We have powerful evidence, we will proceed with it,” Spitzer added, referring to the probe of Greenberg. Spitzer did not say whether the investigations would result in indictments, according to accounts of the interview. And he dismissed suggestions from Greenberg’s lawyer that the key issues in the investigations were the result of accounting errors.

“The evidence is overwhelming that these were transactions created for the purpose of deceiving the market. We call that fraud,” Spitzer reportedly asserted. “It is deceptive. It is wrong. It is illegal.”

To shed additional light on the transactions, federal and state regulators are meeting this morning with Berkshire Hathaway chairman Warren Buffett at the New York offices of the Securities and Exchange Commission, reported the Associated Press. During the television interview Spitzer confirmed reports that a subsidiary of one of Buffett’s companies had turned over “very powerful and substantial evidence” as part of the AIG investigation, reported Reuters. The attorney general added, however, that Buffett is a witness and not a suspect. “We believe [Buffett] can shed light on a series of transactions that…Hank Greenberg participated in,” said Spitzer, according to the AP.

Greenberg is scheduled to sit for a deposition tomorrow in Spitzer’s office. However, according to some media reports, he may refuse to answer questions, invoking the Fifth Amendment. The Times also reported that Greenberg’s lawyers have appealed to regulators to limit the scope of the interview.

The New York Post, meanwhile, reported today that Spitzer received $18,500 in campaign contributions from 16 different attorneys from the law firm of Paul, Weiss, Rifkind, Wharton & Garrison, which is currently representing AIG and where Spitzer once worked as an associate.