Escolar Documentos
Profissional Documentos
Cultura Documentos
The Scandal
In 2000, Security Exchange commission recognized that AIG assisted a client company in
strengthening their balance sheet through a fake insurance transaction
Till 2003 the investigation was continuing after which SEC and Justice Department
settled with AIG for a penalty of $10milliion
In 2004, the federal grand jury filed a complaint against the company after investigating
the Companys smoothing products
In 2005, the reinsurance agreement for $500 million with Gen Re, allowed AIG to
improve its reported reserves improperly. During the month 2005 the cany exses that
the reinsurance deal should have been accountant as deposit. In mid 2005, AIG admits
that they done improper accounting. They engaged in misleading accounting and
financial reporting.
The companys two improper transactions gave the investors the impression that the
Company has large reserves for claim than it did.
CEO Hank Greenburg was the main culprit behind this scandal. He booked loans as
revenue, made traders to inflate stock prices. The CFO, Howard Smith supported the
CEO Hank Greenburg in this scandal s well.
Ethics Violated
A set of rules for accounting which was made for reason was totally lost.
They did improper accounting and improper insurance transactions
They totally damaged the reputation of the customers and stake holders had about the
company. For which they deserved t ay $115 million.
This even created a sign an anxiety and greed towards the small companies which
thought their fraud couldnt be identified.
This accounting scandal mentally affected all its customers and the people who had
insurance policies with other companies.
Recommendations
The official securities should more research about the company and try to solve the
problem right away.
The government should track these transactions between companies because in this
scandal it shows that the government didnt know about the violations until the
company themselves exposed.
They should always keep an eye on the top people because in this case the CEO Hank
Greenberg and CFO Howard Smith were the main culprits.
The government should always keep a close track of the companies accounts to check if
theres any fraud activity.
Moreover the people or investors should take initiative to keep a close attention
towards any companys net income before investing.