Following on these earlier posts regarding the increasing threat of criminal indictment that is being place on American International Group executives, AIG canned two of its top executives — CFO Howard I. Smith and VP Christian M. Milton — after the two invoked their Fifth Amendment right against possible self-incrimination in the ongoing investigation into whether whether AIG manipulated its books in connection with a transaction involving General Re Corp., a unit of Warren Buffett’s Berkshire Hathaway Inc.
Both men were terminated pursuant to an AIG company policy that requires employees to cooperate with government authorities investigating matters pertaining to the company. However, the two employees were clearly placed in an untenable position given recent developments in similar criminal investigations. In connection with this investigation involving Computer Associates, three former executives of that company pleaded guilty to obstruction of justice charges that were not tied to alleged misstatements told to federal investigators, but to alleged misstatements made to the company’s own law firm during the company’s internal investigation. Similarly, in this case involving accounting giant KPMG, the government required threatened criminal action against KPMG in connection with a tax avoidance scheme unless the firm forced one of its partners to cooperate with the government, which of course can use the partner’s statements against him in prosecuting a crime.
Accordingly, rather than attempt to facedown the government over its increasingly common use of its odious power to criminalize merely questionable business transactions, the AIG Board has decided to offer several sacificial lambs to the Lord of Regulation in an effort to avoid a meltdown of the company. One can only ponder how many such lambs this Lord will require?