NY Authorities Sue AIG, Ex-Execs for Fraud

New York authorities on Thursday filed a civil lawsuit against American International Group Inc. (AIG) and two former top executives of the insurance company, saying they committed fraud and manipulated its books to deceive regulators and investors.

In the first legal action by regulators concerning AIG's recently acknowledged accounting errors, New York Attorney General Eliot Spitzer (search) and New York Insurance Superintendent Howard Mills cited a pattern of fraud at the world's biggest insurer by market value.

Former Chairman and Chief Executive Maurice "Hank" Greenberg (search), and former Chief Financial Officer Howard Smith, who were ousted as the initial investigation picked up steam, were also named in the suit.

"The former top management routinely and persistently resorted to deception and fraud in an apparent effort to improve the company's financial results," Spitzer said in a written statement.

The suit says Greenberg and Smith took part in numerous fraudulent business deals that exaggerated the strength of the company's core underwriting business and propped up its stock price.

The company is under investigation by Spitzer, the Securities and Exchange Commission (search) and several state insurance regulators over accounting irregularities.

The civil complaint cites e-mails and other evidence showing that Greenberg was personally involved in negotiating fraudulent deals, and directed AIG staffers to help put together other misleading transactions.

Early this month, AIG detailed a lengthy list of accounting and other improprieties and said it would restate nearly five years of financial results, slashing $2.7 billion from its net worth.

In its statements, AIG has disclosed a range of improper accounting moves, including overstating investment income, masking underwriting losses, and valuing assets too highly.

The civil complaint stems from investigations that came to light Feb. 14.

AIG is expected to file its much-delayed 10-K annual report with securities regulators early next week.