American International Group (1)

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AIG Auditing Scam

By

Venika Wadhwa (16059)

Sanya Sharma (15053)

Esha Rohila (16026)

Hanspreet Singh (16066)

BFIA III

Shaheed Sukhdev College of Business

Studies

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Contents

INTRODUCTION.................................................................................................. 4

INITIAL WARNING SIGNS AT AIG ...................................................................... 4

AIGS PREVIOUS FRAUDULENT ENCOUNTERS .................................................... 5

BRIGHTPOINT ....................................................................................................... 5

PNCFINANCIAL SERVICES GROUP INC ......................................................................... 6

CONCLUSION ...................................................................................................... 6

AIGS OWN ACCOUNTING GOES UNDER REVIEW ................................................ 6

AIG/GENERAL RE DEAL ...................................................................................... 7

OTHER PROBLEMS IDENTIFIED .......................................................................... 8

IMPROPER USE OF FINITE POLICIES.................................................................. 9

MORE CASES OF QUESTIONABLE ACCOUNTING ................................................ 10

SINCE MAY 2005 ................................................................................................ 11

AIGS SETTLEMENT .............................................................................................. 12

CRIMINAL CHARGES.............................................................................................. 12

OTHERRECENT UPDATES ....................................................................................... 13

AIG TIMELINE .................................................................................................. 13

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ACKNOWLEDGEMENT

We would like to express our gratitude to all those who gave me the possibility to completethis project.

We are deeply indebted to our supervisor Ms Sanjana Juneja, whose help, stimulating

suggestions and encouragement helped us in all the time of research for writing of this

project.

Especially, we would like to give our special thanks to our parents whose patient support

enabled us to complete this project.

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Introduction

American International Group, Inc.(NYSE: AIG) or AIG is an

American multinational insurance corporation. Its corporate headquarters is located in

the American International Building in New York City. The British headquarters office is

on Fenchurch Street in London, continental Europe operations are based in La Dfense,

Paris, and its Asian headquarters office is in Hong Kong. According to the 2011 Forbes Global2000 list, AIG was the 29th-largest public company in the world. It was listed on the Dow

Jones Industrial Average from April 8, 2004 to September 22, 2008.

Largest U.S. commercial insurer 93,000 employees Does work from insurance to asset management in 130 countries Main customers are businesses, but it also sells life and property insurance toindividuals

One of the largest, most profitable companies in the world Known for its steady earnings growth CEO: Maurice Hank Greenberg Worlds biggest reinsurance buyer Shareholders equity 2007: $95.80 billion Annual Net Income2004: $9.84 billion

2005: $10.48 billion

2006: $14.05 billion

2007: $6.2 billion

Initial Warning Signs at AIG

A company founded in 1987 called Coral Reinsurance in Barbados only had one customer:

AIG In 1991, Coral Re held more than $1 billion in estimated losses from AIG but only had

$15 million in capital Regulators became convinced that Coral Re was under AIGs control

and no real risk was being transferred AIG eventually agreed to stop its business with Coral

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Re, but AIG never admitted Coral Re was an affiliate and never was fined The states simply

made AIG promise to report any similar reinsurance transactions in the future. That

appeared to be the end of AIG's problems with questionable links to offshore reinsurers. In

truth, it was only the beginning. An AIG division reported that it had transferred large pieces

of reinsurance from Coral Re to a Barbados company called Union Excess.

Eliot Spitzer named AIG as a participant in a bid-rigging scheme with other major insurers

and insurance broker Marsh & McLennan Cos. 2 former AIG employees pleaded guilty in the

scheme Marsh & McLennans CEO at the time was AIG CEO Maurice R. Hank Greenbergs

son (Jeffrey Greenberg) Eliot Spitzer cited Fortune Brands (sells home/office products,

wine/spirits, etc.) as a victim of the bid-rigging. Marsh directed underwriters at ACE Ltd.

(headed by Evan Greenberg, Maurice Greenbergs other son) to raise their quote on excess

liability coverage for Fortune Brands to keep it from competing with a unit of American

International Group Inc. In an internal email it was stated by ACE "We were morecompetitive than AIG in price and terms. (Marsh) requested we increase premium to $1.1

million to be less competitive, so AIG does not (lose) the business." Mr. Spitzer has charged

that insurers intentionally produced inflated quotes and lost business in the alleged Marsh

bid rigging, knowing that they would later win other accounts from the broker. New York

Attorney General Eliot Spitzer sued MMC, charging the broker with steering clients to

insurers paying Marsh the highest contingent commissions and rigging bids on client

programs. Mr. Spitzers investigation has produced 9 guilty pleas in tota l so far. The younger

Mr. Greenberg was forced from his post as the chief of Marsh & McLennan Cos. after Mr.

Spitzer publicly said he wouldn't deal with the company during a bid- rigging probe of itsinsurance brokerage if Mr. Greenberg was in charge.

AIGs Previous Fraudulent Encounters

Brightpoint

AIG helped Brightpoint design a retroactive insurance policy to spread out losses that

should have been recognized immediately SEC accused AIG of both fraud and helpingBrightpoint falsify its earnings in 1998

Overstated earnings by 61% Hid some of Brightpoints $29 million in losses Fraud surfaced in 2003AIG agreed to pay $10 million fine in a settlement of civil charges with the SEC. AIG worked

hand-in-hand with Brightpoint personnel to custom design this insurance policy. Basically,

money just transferred from Brightpoint to AIG back to Brightpoint, no risk was transferred).

By disguising the money as insurance AIG enabled Brightpoint to spread a loss that should

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have been recognized immediately out over several years (Brightpoint would pay monthly

premiums to AIG for 3 years, but during the time AIG paid the money back in the form of

insurance claims, Brightpoint recorded the payments as insurance receivables to offset its

losses). AIG also withheld documents and committed other abuses which made its

misconduct worse. AIGs profit from this policy was less than $100,000.

PNC Financial Services Group Inc

AIG helped PNC Financial Services create 3 special-purpose, off-balance-sheet investment

vehicles in 2001 SEC charged that AIG acted as a counterparty to move $762 million of

underperforming loans or volatile assets off PNCs balance sheet. AIG again helped clients

deceive investors by selling insurance products or creating off-balance-sheet vehicles thathave the effect of downplaying losses or overstating earnings. This let PNC show earnings

that were 52% more than they would have been without these special purpose vehicles.

These investment vehicles allowed PNC to dump assets into them that they expected to

deteriorate. AIG also contributed funds to these vehicles. AIG resisted requests for

documents, emails, and other information the SEC and Justice Dept. requested and

downplayed the seriousness of investigations in public statements. AIG, from the firm s

management fees for the first year, made $8.1 million from the PNC transactions.

Conclusion1. In both cases, AIG helped these companies hide adverse financial developmentsfrom their shareholders

2. AIG never admitted or denied wrongdoing in either case3. Settlement- AIG pays:a. $80 million penalty to the Justice Departmentb. $46 million to a SEC restitution fund

AIGs Own Accounting Goes under Review

New York Attorney General Eliot Spitzer and the SEC had been focusing on therelationships between AIG and their clients

Now focus is shifting to AIGs own financial statements

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Regulators are interested in whether AIG has aided their own results with thetechniques they pioneered and marketed in years past

AIG maintains its own accounting is not an issueStarting to investigate nontraditional insurance products and certain assumed reinsurance

transactions and AIG's accounting for such transactions. AIG in February 2005 had

announced it was subpoenaed by the U.S. Securities and Exchange Commission and New

York Attorney General Eliot Spitzer's Office in an investigation of non-traditional insurance

products that investigators said might have been used to improperly improve the company's

financial picture. Investigation is beginning to focus on AIGs own use of finite ris k

coverages. The SEC has also requested information on the use of finite risk products from

other companies, including General Re Corp., Chubb Corp., ACE Ltd. and Swiss Reinsurance

Co. This may be the first time regulators are investigating these products' impact on an

insurer's own book, rather than on its clients'.

Mr. Spitzer and the SEC subpoenaed Berkshire Hathaway Inc., the insurance-holding

company run by billionaire investor Warren Buffett. The Omaha, Neb., company said the

subpoenas sought documentation and information relating to nontraditional or loss-

mitigation insurance products from its General Re unit and the unit's affiliates. Some of the

"alternative risk" transactions that regulators are looking into across the industry allow

insurers to improve their balance sheets in the short run either by moving some of their

claims reserves to another insurer, or taking on another company's reserves. Such

arrangements can violate accounting rules if sufficient risk isn't transferred.

AIG/General Re DealRegulators focus on a deal AIG cut with General Re, a reinsurance company. Investigators

say AIG bought insurance from General Re and accounted for it in a way that overstated

revenue.

In March 2005, AIG said for the first time that the 2000-01 transaction with General Re was

improperly recorded as a reinsurance deal. At the time, some AIG shareholders were

questioning whether the insurance company had enough money set aside to cover potential

claims, known as reserves. Under the transaction, AIG shifted $500 million of expected

claims to itself from General Re, along with $500 million of premiums. AIG booked the

premiums as revenue, and then added $500 million to its reserves to reflect its obligation to

pay the claims. If AIG was receiving the premiums to ensure that it didn't lose anything in

the deal, then it faced no risk. In that case, it wasn't really insuring anything and the $500

million shouldn't have been treated as premium revenue. General Re received a $5 million

commission for the deal. For its part, General Re did not treat the transaction as an

insurance policy; instead, it booked it as a finance deal, people familiar with the matter have

said. The more significant issue for General Re is whether it aided any improper accounting

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at AIG. Authorities are scrutinizing General Re on that issue and may be spurred further by

yesterday's AIG statement, although the statement didn't discuss whether General Re bore

any responsibility for the transaction's problems.

AIG admits to: using insurers in Bermuda and Barbados that were secretly controlled by AIG

to bolster its financial results, including shifting some liabilities off its books a broad range of

improper accounting that could slash its net worth by $1.77 billion, improperly accounting

for a reinsurance transaction with Berkshire Hathaway Inc.s General Re in 2000-2001.

After the admission, Investigators now are examining actions of top AIG officials. The SEC

could bring civil fraud charges against the company or executives. AIGs shares fell 1.8%

continuing to sliden Feb. 14, 2005 AIGs shares are down 22% since closing on Friday, Feb.

11. Standard & Poors and Moodys downgraded AIGs long -term bonds and certain other

debt by a notch from its top AAA and Aa1 rating. A.M. Best put AIG under review with

negative implications. Fitch Ratings put AIG under Rating Watch Negative. Company

says accounting problems probably will not deplete its net worth (shareholders equity) by

more than 2%. AIG CEO Hank Greenberg resigns in March 2005 and retired as AIGs

chairman days later. Shareholders equity would still be above $80 billion. Mr. Greenberg

had been running AIG for nearly four decades and was responsible for moving AIG into

China which is now one of its most promising regions. Many say Mr. Greenberg was the

most powerful executive in the history of insurance. Mr. Greenberg took AIG from $300

million market value to about $160 billion. However, Spitzer praises AIG for changing some

top management.

In late 2000 and 2001, Gen Re shifted $500 million of expected claims to AIG along with

$500 million of premiums. Gen Re accounted for this transaction properly. AIG recorded the

premiums as reveue and added $500 million to its reserves to show its obligation to pay

claims

Other Problems Identified

AIG booked $300 million in gains on its bond portfolio from 2001-2003 without actually

selling bonds. If it had waited to book the income until it sold the bonds, the income would

have come later and been counted as "realized capital gains.

Money owed to AIG by other companies for property-casualty insurance policies may not be

collectible. The company said that could result in an after-tax charge of $300 million.

Potential problems with AIG's accounting for the up-front commissions it pays to insurance

agents and similar items might force it to take an after-tax charge of up to $370 million.

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AIG also will begin recording an expense on its books for compensation paid to its

employees by Starr International, the private company run by current and former

executives. Starr has spent tens of millions of dollars on a deferred- compensation program

for a hand-picked group of AIG employees in recent years.

Underreporting its premium income from workers' compensation policies enabled AIG to

under contribute to worker's compensation funds and underpay taxes on workers' comp

premiums.

Improper Use of Finite Policies

But in practice, finite policies have sometimes been used improperly. In 2000 and 2001,

AIG's Greenberg asked General Re to do an unusual deal involving a bundle of finite

contracts General Re had written for clients. AIG took over the obligation to pay up to$500 million in claims on the contracts. At the same time, General Re passed to AIG $500

million in premiums the clients had paid. AIG paid General Re a $5 million fee for moving

these contracts to AIG's books.

Last year, General Re reported the deal to investigators who were questioning a number of

reinsurers about finite policies. This deal carried a red flag because it was backwards:

Typically, it would be AIG seeking a finite policy to shift risk to General Re. Because the

$500 million in premiums had to be paid back to General Re, AIG seemed to be losing

money on the deal, not making it. So why had Greenberg asked to take over those

contracts?

In accounting for the deal, AIG tallied the premiums as $500 million in revenue and applied

that amount to its reserve funds used to pay potential claims. This helped satisfy

shareholders who had been concerned AIG did not have enough in reserve.

The issue in this deal, as in many finite insurance contracts, is whether AIG was providing

insurance coverage or receiving a loan. To be insurance, AIG would have to assume a risk

of loss. An industry rule of thumb known as "10/10" says the insurer should face, at a

minimum, a 10% chance of losing 10% of the policy amount for the contract to be

considered insurance.

In the absence of that degree of risk, the premiums transferred from General Re to AIG,

and repayable later, would be a loan. AIG would then not be able to count the $500 million

in premiums as additional reserves, as it had.

On March 30, AIG directors announced that: "Based on its review to date, AIG has

concluded that the General Re transaction documentation was improper and, in light of

the lack of evidence of risk transfer, these transactions should not have been recorded as

insurance."

As a result, the company said it would reduce its reserve figure by $250 million and showthat liabilities had increased by $245 million. However, it added, these changes would

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have "virtually no impact" on the company's financial condition. Bottom line: The AIG-

General Re deal was an accounting gimmick to make AIG's reserves look healthier than

they were -- an apparent effort to deceive regulators, analysts and shareholders.

More Cases of Questionable Accounting

The directors then surprised observers by announcing they had uncovered a number of

additional cases of questionable accounting.

The most serious involved reinsurance contracts AIG had taken with a Barbados reinsurer,

Union Excess, allowing AIG's risk to pass to the other company and off AIG's books. AIG

found that Union did business exclusively with AIG subsidiaries, and that Union was

partially owned by Starr International Company Inc. (SICO), a large AIG shareholder

controlled by a board made up of current and former AIG managers. Hence, the AIG

statement said, SICO could be viewed as an AIG unit, or "consolidated entity," and SICO'srisks were therefore actually AIG's. As a result, AIG had to reduce its shareholders' equity

by $1.1 billion.

Another case involved a Bermuda insurer, Richmond Insurance Company, that the

directors found to be secretly controlled by AIG. A third concerned Capco Reinsurance

Company, another Barbados insurer, and "involved an improper structure created to

recharacterize underwriting losses as capital losses," the directors said. Fixing this meant

listing Capco as a consolidated entity and converting $200 million in capital losses to

underwriting losses.

Yet another case involved $300 million in income AIG improperly claimed for selling

outside investors covered calls on bonds in AIG's portfolio. Covered calls are supposed to

give their owners the option to buy bonds at a set price for a given period, but AIG used

other derivatives transactions to assure it could retain the bonds.

The directors also stated that certain debts owed to AIG might be unrecoverable, resulting

in after-tax charges of $300 million. And they noted that the company was revising

accounting for deferred acquisition costs and other expenses involving some AIG

subsidiaries, resulting in as much as $370 million in corrections.

Some of the revelations seemed eerily similar to ones raised in the Enron case, which

included use of little known offshore subsidiaries to hide liabilities, although the scale of

the abuse so far appears to be far smaller at AIG.

The scandal highlights one of the dilemmas of American accounting, says Catherine M.

Schrand, professor of accounting at Wharton. "We have one-size-fits-all accounting for

firms in this country. If the standard-setters try to make it too specific and take out all the

gray areas, then they would have a problem creating financial statements that are

relevant.

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Since May 2005

The $1.2 trillion insurance industry is overseen by small state offices who are not equipped

to detect multistate or international scams. State regulators defend the job they've done.

The problem, they say, is that insurers lied to them. Outside auditors didn't penetrate

AIG's structure to detect supposedly independent reinsurers that AIG now says it secretly

controlled or hidden side agreements between insurers. Nor did the financial industry

specialists who reviewed the insurers' filings at the SEC. After the Coral Re dispute, AIG

pledged in writing to reveal any ties with its reinsurers -- and filed statements certifying

the independence of specific companies that it now acknowledges controlling or backing.

Still, critics contend that the fragmented system of state regulation lacks the checks that

can expose frauds before they compound. To coordinate efforts, state regulators have

banded together in the National Association of Insurance Commissioners. But the NAIC

doesn't regulate or investigate.

AIG would restate more than 4 years of financial statements which will reduce its net

worth $2.7 billion. AIGs current management said there were issues with its internal

controls. AIGs stock has fallen 30% . The company said it would restate financial

statements for 2000, 2001, 2002 and 2003 and for 2004's first, second and third quarters.

AIG's stock, long a Wall Street darling, has fallen 30% since its disclosure on Valentine's

Day that it had received subpoenas from regulators. The company's internal investigation

uncovered instances where AIG quickly shifted money in and out of hedge funds near the

end of financial reporting periods. Regulators believe this strategy was designed to burnish

AIG's results. There are instances in which so-called derivative trades, such as futures

contracts that allow investors to bet on currencies, was "incorrect" under Financial

Accounting Standards Board's rule 133. The rule governs how companies measure thevalue of and returns on derivatives. Regulators suspect the insurer may have used

favorable "hedge" accounting for derivatives positions that weren't initially intended to

hedge a specific risk.

Elizabeth Monrad, John Houldsworth, and Rick Napier each received a Wells Notice from

the SEC notifying them that they could face securities-fraud charges due to their work at

General Re. At the end of May, AIG restated 5 years of financial results reducing its net

income by 10%. Ms. Monrad was the chief financial officer at Gen Re, Mr. Houldsworth is

chief underwriter for General Re's reinsurance unit in Dublin, and Rick Napier, a senior

vice president at Gen Re. Regulators are focusing on a conference call that took place inNovember 2000 between Ms. Monrad, Mr. Napier and two AIG executives, as evidence of

Ms. Monrad's knowledge of AIG's plans to commit the fraud. In addition, the SEC has

zeroed in on steps both executives took to create a so-called paper trail of false documents

justifying the transaction.

At the end of May 2005, New York state authorities sued AIG, former CEO Maurice R.

Hank Greenberg, and former CFO Howard I. Smith. These are civil charges and not

criminal charges, but criminal investigation of individuals still continues. The goal, the suit

contends, was to exaggerate the strength of the company's core underwriting business,

propping up the price of one of the nation's most widely held stocks. The lawsuit, filed inthe state court in Manhattan and seeking damages and disgorgement of any illegal profits,

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alleges a range of improper accounting and activities. This civil lawsuit was filed by New

York Attorney General Eliot Spitzer and New York State Insurance Superintendent Howard

Mills. The lawsuit revealed little new material information against AIG that hadn't already

been made public, and its primary focus was Greenberg and Smith, rather than the

company itself or current management. Mr. Spitzer backed off seeking possible criminal

charges against Mr. Greenberg in June.

AIGs Settlement

AIG resolves allegations by reaching a $1.64 billion settlement. AIG will also have to submit

to additional reinsurance reporting and financial reporting. The settlement does not

resolve the cases against Greenberg or Smith. AIG has not admitted or denied allegations.

AIG also faces a $1.1 billion after-tax negative reserve development. The $1.64 billion is to

settle state and federal charges of securities fraud, bid-rigging and failure to pay proper

contributions to various state workers' compensation funds.

Under the terms of the settlement, AIG will pay $800m to a fund for investors deceived by

its false financial statements and a fine of $100m.

Policyholders affected by AIG's bid rigging will receive $375m, and a further $344m will go

to states harmed by AIG's understatement of workers' compensation premiums. The

company will also pay a fine of $100m and a $25m penalty to the Justice Department.

Industry observers concurred the $1.64 billion settlement, which is one of the largest-ever

regulatory fines assessed on a single corporation--shouldn't hinder the company.

In an amendment filed Sept. 2006 in New York State Supreme Court, the authorities

removed AIG as a defendant. Additionally, they dropped an allegation relating to

underpayment of contributions to state workers' compensation plans -- for which AIG had

already pledged restitution. Authorities continue to charge that Mr. Greenberg and

Howard I. Smith misled investors with sham transactions that artificially boosted AIG's

reserves and disguised underwriting losses. But the suit eliminates previous allegations

that the two executives guided AIG schemes to avoid state workers compensation

premium taxes and to conceal AIG's control of several offshore entities.

Criminal Charges

3 Gen Re executives and 1 AIG executive plead innocent to 16 counts including conspiracy,securities fraud, false statements to the SEC, and mail fraud

Ronald Ferguson:former CEO at Gen Re Betsy Monrad:Gen Re's former chief financial officer Robert Graham:former Gen Re assistant general counsel Christian Milton:AIG's former vice president of reinsurance

1 Gen Re executive is charged on 10 counts Christopher P. Garand: Gen Res senior vp and chief underwriter for finite

reinsurance operations from 1994 to 2005

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Other Recent Updates

Fred Hafetz, a lawyer for Mr. Milton, the only defendant who worked for AIG, said he

believes his client was denied a fair trial when he was prosecuted with the four former

General Re executives. None of the defendants testified. The case hinged largely on emails

and taped phone conversations in which the defendants could be heard clearly discussing

details of the deals, laughing about financial-reporting rules and even poking fun at AIG's

accounting practices. Several observers expressed surprise that the jury found all five

defendants guilty on all counts despite their varying degrees of involvement in the

reinsurance deal, saying they had expected a split verdict, a hung jury or acquittals on

some counts.

Ferguson, Graham, Milton, and Monrad are all convicted on the 16 counts. Garand is

convicted on 10 counts. The most compelling evidence in the trial was taped phone

conversations and emails. Lawyers for the five defendants convicted said they intend to

appeal. Following the verdicts, the judge set May 15, 2008 for sentencing and released

each of them on a $1 million bond. The investigation is still continuing and more

indictments may come. Mr. Greenberg and Mr. Brandon (current CEO of Gen Re) still face

no criminal charges. Warren Buffett is not charged with anything and is no longer being

investigated

AIG Timeline

Date Event

1987 AIG Financial Products Corp. is created.

1998 AIG Financial Products begins to sell highly rated credit

default swaps to other financial institutions.

2005 AIG restates its prior accounting for many transactions.

Maurice R. "Hank" Greenberg steps down as AIG's long-time

chief executive officer amid several widening investigations

into the company's business practices. He is succeeded by

Martin J. Sullivan, who had been vice chairman and co-chief

operating officer. Sullivan also is elected president.

2006 AIG consents to a final judgment on SEC accounting fraud

charges, accused of falsifying its financial statements from at

least 2000 until 2005. AIG pays a total of $800 million,

including $100 million in penalties.

2007 The valuation of the securities that the credit default swaps

were designed to protect drop as the U.S. mortgage market

begins to deteriorate. AIG records significant unrealized

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22 executives.

Oct.

31

AIG is given access to nearly $21 billion through the Federal

Reserve's new commercial paper program.

Nov.

13

AIG closes 178 branches and cuts approximately 380 jobs at

American General Finance Inc.

Nov.

25

AIG cuts jobs and takes its name off an auto insurance unit,

AIG Direct, which is rebranded as 21st Century Insurance.

Nov.

25

AIG announces salaries to be frozen and bonuses cancelled

for its top executives and Chairman Liddy's salary will be $1 a

year until 2010.

Dec. Federal Reserve Bank of New York created Maiden Lane LLC

to purchase $53.5 billion of collateralized debt obligations.

2009 Jan. 8 AIG cancels $93.3 million in bonuses to former employees

and top executives.

Mar. 2 AIG receives $30 billion in a second revised rescue plan.

AIG's fourth quarter 2008 record loss of $61 billion was the

largest corporate loss in U.S. history.

Mar.

16

President Barack Obama instructs Treasury Secretary Tim

Geithner to block the payment of $165 million in bonuses to

AIG executives in the Financial Products division.

Mar.

24

AIG employees of the Financial Products unit agree to return

$50 million from bonuses paid out on March 15.

April 3 21st Century Insurance, a subsidiary of AIG, closes four

offices and lays off 7% of its work force.

April 7 AIG receives loan $800 million loan from American General

Finance Corp.

May 4 Maurice R. "Hank" Greenberg sells AIG shares to Starr

International Co.

May

19

AIG names six new independent director nominees who will

stand for election at the company's annual shareholders

meet June 30.

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May

21

AIG's Chairman and Chief Executive Officer Edward M. Liddy

say he will resign.

May

22

Three members of AIG's board of directors will not seek re-

election at the annual shareholders meeting, including

Stephen F. Bollenbach, Martin S. Feldstein and James F. Orr

III.

June 5 A federal judge grants a request by AIG for a jury trial in a

lawsuit with Starr International Co., run by Greenberg, over

control of a large block of AIG stock.

June

30

AIG announces a two-for-one stock split, giving investors one

new share for every 20 they owned.

July 7 Federal jury rules that Greenberg's company did not loot a

trust fund that AIG claimed was established to provide

compensation for senior AIG execs.

July 20 AIG files shelf registration statement with SEC, enabling it to

issue stock in the future.

July 20 The Federal Reserve Bank of New York enters into an

agreement making Morgan Stanley its financial adviser for

selling assets or stock offerings from AIG.

July 27 AIG creates a third special purpose vehicle containing the

equity of Chartis, its new property/casualty entity. SPVs for

the equity of AIA and American Life Insurance Co. were

created July 25.

Aug.

10

Former MetLife CEO Robert H. Benmosche starts in his role

as president and chief executive of AIG.

Aug.

19

Benmosche decides the company should keep the

independent broker/dealer business that was formerly

known as AIG Financial Advisors and has been renamed

Sagepoint Financial Inc.

Aug.

31

AIG, Maurice Greenberg and Howard Smith agree to

arbitrate their disputes.