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Senior AIG Executive Has Deal
To Cooperate with Authorities
By Monica Langley, Theo Francis,
and Ian McDonald
The Wall Street Journal
Friday, May 13, 2005
A senior executive at American International Group Inc. has struck a
deal with authorities investigating the giant insurer's accounting
to offer his testimony in return for immunity from potential
charges, according to people familiar with the matter.
Joseph H. Umansky, president of AIG Reinsurance Advisors since the
unit's founding in 1992, agreed to the deal with authorities
recently, according to these people. Mr. Umansky's attorney declined
to comment. A spokesman for AIG said Mr. Umansky is still employed
by the firm and declined to comment further.
Questionable reinsurance pacts, which are insurance policies for
insurers, are at the heart of multiple and overlapping probes of
AIG's accounting by the Securities and Exchange Commission,
Department of Justice and New York state regulators. It isn't clear
which regulators have agreed to the arrangement with Mr. Umansky.
Authorities expect Mr. Umansky to shed light on AIG reinsurance
transactions with Berkshire Hathaway Inc.'s General Re unit, in
addition to offshore insurers Union Excess Reinsurance Co. and
Richmond Insurance Co., with which AIG had undisclosed ties,
according to one of these people.
The authorities are probing reinsurance deals and other accounting
moves over the past five years that they believe had the effect of
polishing the company's results and misleading its shareholders. The
reinsurance deals in question are several under which there may not
have been enough risk transferred to qualify for the favorable
insurance accounting that AIG used. In a statement May 1, AIG
acknowledged that a variety of improper or potentially improper
accounting issues would slash about $2.7 billion, or 3.3%, off its
net worth.
Mr. Umansky is believed to be the first AIG executive to strike a
deal with authorities in exchange for immunity. AIG fired two
executives in March, including its then chief financial officer,
Howard I. Smith, for not cooperating with the ongoing investigation.
Maurice R. "Hank" Greenberg, AIG's top executive for nearly four
decades, retired under pressure in March. Mr. Greenberg exercised
his Fifth Amendment rights when summoned by regulators for a
deposition last month.
In the May 1 statement, AIG released a detailed menu of accounting
issues, after missing its third self-imposed deadline for filing its
annual report to shareholders with the SEC. In that report the
company said that "certain former members of senior management" were
able "to circumvent internal controls."
The statement didn't name the former executives, but people familiar
with AIG's continuing review by two outside law firms say the
references included Mr. Greenberg and Howard I. Smith, who was AIG's
chief financial officer. Representatives for Mr. Greenberg have said
they have too little information to comment on the allegation; Mr.
Greenberg has in the past told associates that he believes his
actions were proper. An attorney for Mr. Smith has said other
executives would have been involved in approving the company's
financial statements.
Earlier this week The Wall Street Journal reported that
investigators involved in the AIG probes said they believe knowledge
of-and participation in-questionable "top level" accounting
adjustments extends beyond Messrs. Greenberg and Smith.
AIG's shares have tumbled more than 28 percent since the company's
Valentine's Day disclosure that it had received subpoenas from
regulators about its accounting.
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