This post from awhile back noted that former AIG chairman and Spitzer target Maurice “Hank” Greenberg and his legal team are preparing a “white paper” defending Mr. Spitzer’s charges of bad accounting at AIG. Here are the previous posts on the saga between AIG and Mr. Spitzer.
Well, the Wall Street Journal has obtained a copy of Mr. Greenberg’s white paper, and in this editorial ($), asserts that the paper “makes a compelling case that AIG’s new management took financial decisions detrimental to shareholders — and for no other purpose than to shift blame to past management and kowtow to Mr. Spitzer.” Here is the later NY Times article on the white paper. Moreover, Patrick over at Spitzer Watch is having some fun with this latest development, too.
After reviewing Mr. Greenberg’s quite reasonable defenses to the litany of Mr. Spitzer’s charges, the WSJ editorial concludes as follows:
There are other AIG accounting curiosities, . . . AIG blamed most of this on “former senior management,” without any notable evidence. AIG holders might also want to know why the company’s longtime auditor, PricewaterhouseCoopers, as well as AIG’s audit committee were happy to sign off on many of these items and then change their minds. Or how some of the same people responsible for the previous accounting are now the ones taking credit for a “cleaned up” AIG.
One possible answer is that AIG is the latest example of a company that felt compelled to play along with a prosecutor’s attempt to apply new standards, on an ex post facto basis, to previous behavior. Threatened by Mr. Spitzer with the death sentence of a corporate indictment, directors first let Mr. Greenberg go. Then wanting to put the whole saga behind them, new management decided on the familiar strategy of conceding every Spitzer allegation and taking the biggest write-off possible.
What isn’t at all clear is how AIG’s shareholders have benefited from this. Mr. Spitzer is making up the rules as he goes along — rather than leaving that job to the legislators and regulators who are charged with it — and investors are footing the bill. AIG’s share price has taken a beating, dropping from more than $73 a share in February to below $50 in April, and recently climbing back above $60. As it seems clear that this accounting flap bears little relevance to AIG’s general financial health, the question is how much of the share price drop is therefore due to Mr. Spitzer alone.
Mr. Spitzer and his media friends portray him as a hero to shareholders. The AIG case offers powerful evidence of precisely the opposite.
Meanwhile, Mr. Spitzer continues to rake in the plea bargains.
This is happening over and over again and prosecutors are having a field day punishing business people who were doing their jobs and depending on the experts to be experts. The experts now get to change their minds and are being rewarded by prosecutors for doing it. Just five years ago, the experts were selling their interpretations for a high price in mahogony-lined conference rooms and convincing senior executives that their proposals were good for these companies. Today, they are hiding- nothing outside of immunity will draw them out- and of course, we all know who has exclusive claim to that key.
The Worldcom case shows that no one can choose the risk of being the only one standing. And the only deterrence message I see is a clear message to deter anyone from trying to claim their innocence against a government accusation.
Let’s just admit that going to trial to defend yourself against the government is a sure loser- not because they are right- but because they have too much power and too much money and because prosecutors have lost their sense of their purpose in this system. Let’s just stop pretending with each other- this fantasy is much too dangerous for those idealists among us.