AIG 2005 Annual Report Download - page 70

AIG, without admitting or denying the allegations in the PNC Settlement
SEC complaint, consented to the issuance of a final judgment In November 2004, AIG and AIGFP reached a final settlement
on February 9, 2006: (a) permanently restraining and enjoining with the SEC, the Fraud Section of the DOJ and the United
AIG from violating Section 17(a) of the Securities Act of States Attorney for the Southern District of Indiana with
1933 (Securities Act) and Sections 10(b), 13(a), 13(b)(2) and respect to issues arising from certain structured transactions
13(b)(5) and Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1 of entered into with Brightpoint, Inc. and The PNC Financial
the Exchange Act; (b) ordering AIG to pay disgorgement in Services Group, Inc. (PNC), the marketing of transactions
the amount of $700 million; and (c) ordering AIG to pay a similar to the PNC transactions and related matters.
civil penalty in the amount of $100 million. These amounts As part of the settlement, the SEC filed against AIG a civil
have been paid into a fund under the supervision of the SEC complaint, based on the conduct of AIG primarily through
to be available to resolve claims asserted in various civil AIGFP, alleging violations of certain antifraud provisions of
proceedings, including shareholder lawsuits. the federal securities laws and for aiding and abetting
In February 2006, AIG and the DOJ entered into a letter violations of reporting and record keeping provisions of those
agreement. In the letter agreement, the DOJ notified AIG that laws. AIG, without admitting or denying the allegations in the
in its view, AIG, acting through some of its employees, SEC complaint, consented to the issuance of a final judgment
violated federal criminal law in connection with misstatements permanently enjoining it and its employees and related persons
in periodic financial reports that AIG filed with the SEC from violating certain provisions of the Exchange Act,
between 2000 and 2004 relating to certain transactions. The Exchange Act Rules and the Securities Act, ordering disgorge-
settlement with the DOJ consists of, among other things, ment of fees it received in the PNC transactions and providing
AIG’s cooperating with the DOJ in the DOJ’s ongoing for AIG to establish a transaction review committee to review
criminal investigation, accepting responsibility for certain of its the appropriateness of certain future transactions and to retain
actions and those of its employees relating to these transac- an independent consultant to examine certain transactions
tions and paying $25 million. entered into between 2000 and 2004 and review the policies
Effective February 9, 2006, AIG entered into agreements and procedures of the transaction review committee. The
with the NYAG and the DOI, settling claims under New independent consultant has a broad mandate to review
York’s Martin Act and insurance laws, among other provisions, transactions entered into by AIG during this period. The
which were originally brought by the NYAG and the DOI in a review of the independent consultant is now ongoing and AIG
civil complaint filed on May 26, 2005. Under the agreements, cannot at this time predict the outcome of this review.
$375 million was paid into a fund under the supervision of the The DOJ filed against AIGFP PAGIC Equity Holding Corp.
NYAG and the DOI to be available principally to pay certain (AIGFP PAGIC), a wholly-owned subsidiary of AIGFP, a
AIG insureds who purchased excess casualty policies through criminal complaint alleging that AIGFP PAGIC violated
Marsh & McLennan Companies, Inc. or Marsh Inc. In federal securities laws by aiding and abetting securities law
addition, approximately $343 million will be used to compen- violations by PNC, in connection with a transaction entered
sate participating state funds in connection with the underpay- into in 2001 with PNC that was intended to enable PNC to
ment of certain workers compensation premium taxes and remove certain assets from its balance sheet.
other assessments. In addition, AIG paid $100 million as a fine The settlement with the DOJ consists of separate agree-
to the State of New York. ments with AIG and AIGFP and a complaint filed against, and
As part of these settlements, AIG has agreed to retain for a deferred prosecution agreement with, AIGFP PAGIC. Under
period of three years an independent consultant who will the terms of the settlement, AIGFP paid a monetary penalty of
conduct a review that will include the adequacy of AIG’s $80 million. On January 17, 2006, the court approved an order
internal controls over financial reporting and the remediation dismissing the complaint with prejudice. The obligations of
plan that AIG has implemented as a result of its own internal AIG, AIGFP and AIGFP PAGIC under the DOJ agreements
review. relate principally to cooperating with the DOJ and other
federal agencies in connection with their related investigations.
18 AIG m Form 10-K