American International Group has agreed to pay $10 million to settle a case brought in U.S. District Court in Manhattan by the Securities and Exchange Commission. The company was accused of designing a policy for Indiana-based cell phone distributor, Brightpoint Inc., which allowed it spread losses over several accounting periods and enabled it to inflate its earnings by over 60 percent.
The SEC had also accused AIG of failing to produce documents that it had requested during its investigation of former company executives, three of whom also faced charges.
AIG issued the following statement concerning the case: “The Consent Decree issued by the Securities and Exchange Commission relates to a ‘non-traditional’ insurance product with respect to which a single insurance policy was issued in 1999 by an AIG subsidiary. AIG consented to the SEC Order to settle the matter and neither neither admitted nor denied the SEC’s findings.
“AIG acknowledges that mistakes were made in the underwriting of this policy. Consistent with its longstanding commitment to ensure that it has sound and effective internal controls, AIG has taken steps to correct those mistakes. AIG’s profit from this policy was less than $100,000.”
According to a report from Reuters Brightpoint agreed to pay a $450,000 civil penalty and two former executives agreed to pay penalties of $100,000 and $45,000 respectively. The article noted that, according to Wayne Carlin, director of the SEC’s Northeast regional office, the penalty assessed on AIG “ranks among the largest fines the agency has levied against a company where misconduct during the investigation has been cited.”
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