American International Group Review Shows Loss of $2.7 Billion Due to Error

[NNN0LHI]

http://ap.tbo.com/ap/breaking/MGBWUTN788E.html

NEW YORK (AP) - American International Group Inc., the troubled insurance company already under federal investigation, will lower its net worth by about $2.7 billion, $1 billion more than an earlier estimate.

In a statement Sunday, the company said it will restate its results from 2000 and delay filing its 2004 annual report for the third time in six weeks. Independent auditors PricewaterhouseCoopers LLP is examining the firm's books.

Martin Sullivan, AIG's president and chief executive officer said in the statement that the company is "working diligently" to complete a new filing and that they will assure "accurate financial statements, rigorous accounting, greater transparency and thorough disclosure."

Calls to AIG's corporate offices went unanswered on Sunday.

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[Journeyman]

1. Oops . . .

[unhappycamper]

2. Gee, do you suppose Eliott Spritzer was onto something?

Is anyone at AIG going to be held accountable?

[Theduckno2]

3. I'll spend 30 minutes tracking down a $.12 difference in my checkbook .

They can make a $2.7 billion mistake and they are working diligently. I would have the accountants strapped to their desks! :shrug:

[DulceDecorum]

4. What

does 2.7 billion dollars look like?

And who do I have to sleep with to get 41.4 million shares?
http://www.insurancejournal.com/news/national/2005/04/14/53758.htm

Maybe they should shake that babe down.
Isn't there a law somewhere about accepting stolen property?

[AP]

7. It looks like a lie big enought to increase share prices so insiders can

unload their stock options for huge profits on an unsuspecting public buying for their 401(k)s and IRA's.

[Trillo]

8. That what my gut says, too.

Results for year 2000, eh? 'Bubble?'

[mia]

11. I'll never be able to retire.

Bush is taking care of Social Security and AIG - Valic handles the Florida retirement and benefits package for public school employees.

http://www.aigvalic.com/valic2003/aigvalic.nsf/contents/home


Our retirement system was also the last big buyer of ENRON stock right before they folded.

http://www.sun-sentinel.com/business/local/sfl-418enronpension,0,4215378.story?coll=sfla-business-headlines



Predators are on the loose and there's nothing to stop them.

[harpo]

9. greenburgs lawyer is David Boies - didn't he go after Microsoft?

[AP]

12. Boies was also the accounting industry's lawyer when they fought SEC rule

changes Arthur Levitt tried to enact to force the insurance companies out of the conflicts of interest they had when performing public audits in addition to consultancy work for the same companies.

[NewJeffCT]

14. It's not the accountants...

Large mistakes can easily be missed by the low level accountants that are cranking through numbers every month or every quarter. It's the job of the CFO, the Controller and their equivalents in each division of AIG to catch the big mistakes - like $2.7 billion.

And, a low level 23-25-27 year old accountant isn't likely to question something if the CFO says, "this is my number," they're more likely to assume that they missed something, or there was some unusual item that accounted for the difference. AIG's accounting department has a reputation for having very long hours under very intense conditions - so, the 23 year old low level accountant probably doesn't even have time to follow-up with his or her boss on the variance...

If a company like AIG has, let's say, 10 lines of business (life insurance, auto insurance, annuities, etc), each one of those lines probably has their own CFO and Controller who reports their results on their specific line of business to a corporate department that consolidates the results and *should* question any major discrepancies from the 10 lines of business. Of course, if the low level corporate accountant questions something, they'll likely get a convoluted explanation from a line manager or director, or their boss will get a convoluted explanation from a line director or VP. (The corporate person will ask the question, as they know they will get the question from the auditors, if the auditors are doing their jobs...)

It's also pretty easy for a Corporate or Line VP to 'sweet talk' a large variance if they are dealing with a "manager" level auditor - somebody with 5-7 years experience out of college in a variety of industiries is often no match for somebody with 20 years experience in a specific industry.

So, if you're not totally confused, a $2.7 billion "mistake" is something that should have been caught, as there are enough levels of review built into a large corporate system. If it was not caught, it was almost certainly intentional and something people pretty high up in the company know about.

[Theduckno2]

15. Enlightening, thanks

You pointed me in the right direction, although I hardly thought a low level accountant actually lost $2.7billion. Your references to "This is my number" and "sweet talk" are quite unsettling to a non-business type like me. I guess that is the creative part of accounting, thanks again.:)

[Name removed]

5. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Spinzonner]

6. Probably forgot to carry one column

You know how easy that is to do

[wellst0nev0ter]

10. Man, I Am SO Glad My Social Security Is Going To Finance These Corps

I swear, all you have to do is scratch skin deep into some of these companies. . .

[Robbien]

13. Another article out today says Greenberg is a micromanager and knew it all

http://www.forbes.com/home/business/2005/05/02/cx_da_0502aig.html

More than a decade ago, during a brief interregnum in my career as a journalist, I was summoned to the office of Maurice "Hank" Greenberg at to talk about the company's annual report. The communications firm where I worked at the time believed that providing some help in the preparation of the annual report might be a wedge into more work for AIG.

"Do you think you can improve on our annual report?" Greenberg growled at me. "Well, here's last year's. See if you can make it better."

Several weeks and many sleepless nights later, we turned in the document. The director of communications for AIG received it and smiled thinly. "You know, of course, who wrote every word of the original you were improving on?" he asked. "Hank Greenberg."

- - -

But it seems doubtful that the annual report was the only item Greenberg micromanaged. At AIG, he had a hand in virtually every new and innovative insurance product that launched from the moment he took control of the small property-casualty operation with its roots in Shanghai. There were even taxi vouchers for his executives that he scrutinized to the finest detail.

[dArKeR]

16. US insurer finds more evidence of improprieties

The American International Group (AIG), the embattled insurance giant, said Sunday night that an in-depth examination of its operations had turned up additional accounting improprieties going back to 2000 that would reduce its net worth by US$2.7 billion, or US$1 billion more than it had previously estimated.

The company also said that the improper transactions or accounting entries, which appeared to have been designed to achieve results "that would enhance measures important to the financial community," in certain cases involved misrepresentations to AIG's regulators and independent auditors as well as some of its own management.

In addition, AIG said that its internal controls were deficient and that, as a result, its auditor, PricewaterhouseCoopers, would issue an adverse opinion on its internal controls over financial reporting.

http://www.taipeitimes.com/News/worldbiz/archives/2005/05/03/2003253005

[Frederik]

17. Hmmm...

Lost $2.7 billion due to "error". No wonder Maurice Greenberg left the company. Maybe he took some of that $1.7 billion extra with him?

[AuntiBush]

18. AIG... boy...

Arn't they located near the Exchange? And Bush wants out Social Security going in the pockets of Wall Street investors?!? With insurance companies like this, who needs enemies.

[bemildred]

19. Insurance is a racket. What can you expect? nt