SEC Subpoenas as Many as 12 AIG Senior Executives in Probe

The Securities and Exchange Commission has sent subpoenas to as many as 12 executives at American International Group Inc. amid several probes into whether questionable accounting transactions were used to improperly bolster AIG’s financial standing, according to a Wall Street Journal report on Monday that cited people familiar with the matter.

The Journal also reported that AIG’s board could decide in the next few days whether or not to cut all ties with Chairman Maurice R. “Hank” Greenberg. Greenberg, 79, was replaced as chief executive two weeks ago — though retained as chairman — as regulatory scrutiny mounted over a 2000 transaction that appeared to have been used to boost the company’s reserves artificially.

According to the Journal, Greenberg has since become frustrated that he may be chairman in name only, citing a source close to the situation saying that Greenberg could pre-empt any board action by retiring. However, Greenberg’s lawyer declined to comment.

Greenberg is scheduled to give a deposition to New York Attorney General Eliot Spitzer on April 12, the Journal report indicated. Should Greenberg refuse to testify, directors could force him out, as they recently did two other executives, including Chief Financial Officer Howard I. Smith, who refused to cooperate with investigators.

On March 27, the company forced out another longtime executive, Michael Murphy, a close colleague of Greenberg and an expert of tax matters who is based in Bermuda, the Journal reported citing unidentified sources. The Journal wrote that Murphy’s attorney, Sean O’Shea, said Sunday that he had not been informed of his client’s dismissal, and did not know whether Murphy had been notified.

Most of the accounting transactions being audited involve AIG’s relationships with various reinsurers, including General Re and Barbados-based Richmond Insurance Co. and Union Excess Reinsurance Co. AIG’s relationship with Starr International Co., which handles deferred compensation for AIG executives, is reportedly also under review. (see IJ article on March 25)

According to the Journal it is not yet known whether new CEO Martin Sullivan was aware of the deals now under investigation. But the newspaper cited unidentified sources as saying he isn’t among the executives who have received supoenas.