$800M fund established for AIG victims

The Securities and Exchange Commission today announced an $800 million Fair Fund for wronged investors of American International Group Inc. The fund is for investors who bought New York-based AIG’s common stock between Feb 8, 2001, and March 31, 2005, and either sold at a loss after Feb. 14, 2005, or held the stock after March 31, 2005. Possible claimants also include those who purchased fixed-income securities affiliated with the insurer between Feb. 8, 2001, and March 31, 2005, and either sold after March 24, 2005, or held after March 31, 2005. Of the full amount, $700 million will be distributed in disgorgement and $100 million of the fund will cover penalties. The distribution, set to be completed by the beginning of 2009, is the conclusion of the saga behind the SEC’s 2006 finding that the insurer falsified financial statements through sham transactions between 2000 and 2005. In the scheme, AIG and General Re Corp. of Stanford, Conn., set up two sham reinsurance transactions to add $500 million in phony loss reserves to AIG’s balance sheet in the fourth quarter of 2000 and the first quarter of 2001, according to the SEC. This bolstered AIG’s stock price and painted a rosy picture of the company’s health. The scandal resulted in the 2005 exit of AIG chief executive Maurice “Hank” Greenberg, named as an unindicted co-conspirator in the federal court case on the fraud that led in February to the conviction of four ex-Gen Re executives and a former AIG executive. Last month, Joseph Brandon, chief executive of Gen Re, stepped down from his post, following news reports that federal prosecutors were pushing for his ouster. Ronald Ferguson, former CEO of Gen Re; Elizabeth Monrad, former finance chief of Gen Re; Christopher Garand, former Gen Re senior vice president; Robert Graham, former Gen Re assistant general counsel; and Christian Milton, former head of reinsurance for AIG, are set to be sentenced next week for their parts in the affair.