In what is becoming a typical development in such sagas, this NY Times article reports that the board of financial services giant American International Group Inc. is considering a move to restate its financial statments as a result of suspected accounting mistakes on its financial statements that may total as much as $3 billion from as many as 30 different insurance transactions. Here are the earlier posts on the the government’s assault on AIG.
As the governmental probes into AIG’s accounting is now far broader than what was believed just a week ago, the AIG board is assessing whether to restate its financial statements in regard to an additional 60 transactions that internal AIG investigators have identified as being potential problems. The potential errors under scrutiny occurred over five year period and include the possible booking of revenue and income prematurely and improperly transferring liabilities off the company’s books. Many of the deals in question could have been designed either to boost AIG’s reserves or to “smooth the earnings” of the company to meet Wall Street expectations.
Gosh, isn’t this starting to sound downright Enronesque?.
Nevertheless, even a multibillion-dollar writedown of earnings should not damage AIG’s long-term financial stability much. The company had net income of over $11 billion last year on revenue of almost $100 billion.
Former AIG chairman Maurice “Hank” Greenberg, who remains as AIG’s nonexecutive chairman, is tentatively scheduled to give a sworn statement to investigators from New York AG Eliot Spitzer’s office and the SEC on April 12. At the rate this scandal is developing, Mr. Greenberg better think seriously about stepping down and taking the Fifth. It is becoming increasingly clear that the Lord of Regulation is going to want more from AIG than simply financial sacrifices.