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NEW YORK--The Securities and Exchange Commission has approved a previously announced settlement of charges against American International Group Inc. over financial transactions between AIG units and PNC Financial Services and Brightpoint Inc.
Under terms of the settlement, AIG will pay an $80 million penalty to the U.S. Department of Justice over the PNC and Brightpoint transactions and $46 million into an SEC restitution fund related to the PNC deals. New York-based AIG will not admit to any wrongdoing under the settlement.
In addition, AIG will be permanently barred from violating the antifraud provisions of federal securities laws and from aiding and abetting violations of the reporting and record-keeping provisions of the federal securities laws. The insurer also will agree to the appointment of an independent consultant to review certain transactions between 2000 and 2004 to determine whether they were used to violate accounting rules or to manipulate financial results. AIG will establish a transaction review committee to review certain future transactions involving heightened legal, reputational or regulatory risk. The independent consultant will review the committee's policies and procedures.
"This action is a message to insurance companies and others that sell structured finance or other products to public companies that are designed for no purpose other than to improve those companies' accounting results," Stephen Cutler, director of the SEC's Division of Enforcement, said in a statement. "In appropriate circumstances, marketers of such products will be held liable for the resulting misstatements in their customers' financial disclosures."
In a statement, AIG Chairman Maurice Greenberg said the company has been forming a complex structured finance transaction committee of senior executives and chaired by AIG Senior Vp and Chief Risk Officer Bob Lewis that will regularly report to Mr. Greenberg and the AIG board of directors.
"This committee will help assure that no product we market in any part of our organization is sold to assist a counterparty or an insured to misrepresent either its income statement or balance sheet," Mr. Greenberg said in the statement.
AIG also announced that Frank Zarb, chairman of the executive committee of the AIG board of directors and John Foster, a former board member of the Financial Accounting Standards Board, have joined the board of AIG Financial Products Corp., the unit that regulators alleged was involved in the marketing and sale of the products under investigation.