TREMORS ON WALL STREET: AIG has admitted to $1.7 billion in improper

Christian Science Monitor

from the April 01, 2005 edition

(Photograph)
TREMORS ON WALL STREET: Traders at work. AIG has admitted to $1.7 billion in improper accounting. The investigation suggests that the era of accounting scandals may not be over despite prosecutions involving Enron and Worldcom. HENNY RAY ABRAMS/REUTERS

A top insurance company as the new Enron?
An accounting probe at AIG worries Wall Street, and involves some of America's richest men.
By Ron Scherer | Staff writer of The Christian Science Monitor

NEW YORK – American business is facing yet another major scandal involving more accounting shenanigans.

But, this scandal has the potential to cause tsunami-sized damage: It involves a highly respected insurance company, American International Group (AIG) - which is part of the Dow Jones Industrial Average - which has now admitted to $1.7 billion in improper accounting. And, it has enveloped some legends in the financial arena: Maurice "Hank" Greenberg, forced out as chairman of AIG, and Warren Buffet, the Omaha stock market guru, who will be questioned about his possible involvement.

Because AIG is so massive and important to the financial world, regulators will have to tread carefully. The company's main business is providing reinsurance, that is, it insures insurance companies. This helps the industry to spread its risk among many large and financially sound companies so a single event does not become a financial disaster for one company.

Also, because of AIG's huge size, lawyers don't think the government will bring a criminal charge against the company as it did for Arthur Andersen, Enron's accountant. The criminal charge was a death sentence for the accountant. [more]
http://www.csmonitor.com/2005/0401/p03s01-usju.html


OrlandoMary
www.maryschneider.us