Former AIG CEO to Pay $15 Million to Settle Claims

New York, NYThe former chairman and chief executive officer of AIG will pay $15 million to settle claims he misled investors. Although the Securities and Exchange Commission (SEC) does not allege that Maurice "Hank" Greenberg was involved in securities fraud, it does allege that he and another AIG officer, Howard Smith, manipulated the company's earnings. Furthermore, the SEC said that Greenberg and Smith were "control persons," making them responsible for what occurred at AIG.

Greenberg was the head of AIG (American International Group Inc.) for 38 years, until he left in 2005 during an investigation by New York's then-Attorney General Eliot Spitzer. In 2006, AIG settled charges of securities fraud and improper accounting by repaying $700 million and paying a fine of $100 million, according to an article at money.cnn.com (August 6, 2009).

According to a Forbes article (August 6, 2009), the SEC accused Greenberg and Smith of being responsible for "material misstatements" that allowed AIG to create an impression that it was either meeting or exceeding earnings expectations. Among the transactions listed as improper were reinsurance transactions and transactions with a shell company that were meant to hide the company's underwriting losses.

Greenberg has denied any wrongdoing in the case.

Meanwhile, a lawsuit seeking class action status has been filed against ProShare Advisors, alleging investors were not warned of the risks inherent in the ProShares UltraShort Real Estate fund. The lawsuit claims that the fund's registration statements were false and misleading and further reports that when the Dow Jones U.S. Real Estate Index fell approximately 40 percent in less than a year, the SRS fund fell about 48 percent.

According to an article at online.wsj.com (August 7, 2009) the Financial Industry Regulatory Authority (FINRA) sent a notice in June, 2009, reminding financial advisors that exchange-traded funds (the type of fund involved in the lawsuit) are not suitable for individuals who plan to hold the funds longer than one trading session.

The SEC has also filed a lawsuit against a securities attorney whose company, Bellwether Venture Capital Fund I Inc., said it had a 550 percent return in 2004, but that the SEC found earned nothing in that year. Furthermore, the SEC alleges, the attorney did not tell investors that he gave up his law license in 2001 so that he would not be disbarred after being convicted for violent felonies. According to an article at the Orange County Register blog (August 4, 2009), the SEC says that the attorney and two of his companies raised $1.87 million and illegally kept $1.2 million.