Stock of the Day
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American International Group (AIG)
Top-level Accounting Problems May Extend Beyond Ex-execs
Knowledge of and participation in questionable "top level" accounting adjustments at American International Group may extend beyond former CEO Hank Greenberg and former CFO Howard Smith, the Wall Street Journal reported Tuesday.
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Some experts believe the extensive nature of the problems reduce the chances that a small number of executives were responsible. As of today, only Greenberg and Smith have resigned, but investigators are now probing AIG accounting beyond these two officials.
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AIG has been trying in recent weeks to distance its current management from the accounting problems. But a spokesman and lawyer for Mr.
Greenberg maintained that other senior managers, and even the company's auditors and directors, knew of the accounting entries.
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As reported in InvestorGuide Stock of the Day back in March, AIG acknowledged that a controversial transaction had been improperly documented. At that time, AIG said it would delay the filing of its annual report until late April. It has missed that deadline as well and still has not filed the report. In a press release on May 1, AIG said that improper accounting over the last five years would cut its net worth by about $2.7 billion, or roughly 3.3%.
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Since March, the investigations have intensified. Accounting maneuvers being investigated include shaving reserve levels, moving expenses and revenue between quarters and mislabeling some capital gains as investment income.
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The stock fell only fractionally this morning on the news, but this is largely because the pessimistic outlook had already been factored in to the stock. Indeed, the stock had fallen about 20% in the six weeks prior to the March announcement as the regulatory probes started to intensify.
AIG will have to work hard to restore investor confidence in the coming months, and the full impact of the accounting problems remains to be seen.
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Profile |
American International Group, Inc., is a holding company which through its subsidiaries is engaged in a broad range of insurance and insurance-related activities and financial services in the United States and abroad. AIG's primary activities include both general and life insurance operations. Other significant activities include financial services and asset management.
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