AIG will sell Asian life insurer to Prudential for $35.5 billion

The board of American International Group approved the sale of the company's crown jewel, American International Assurance, to Prudential of the U.K. for about $35.5 billion. The sale, along with a separate deal, could generate about $50 billion, half of which will go to the Federal Reserve Bank of New York. Prudential's acquisition of AIA was welcomed by government officials because it will generate more cash to repay taxpayers.

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Goldman Sachs disputes New York Times' claims on AIG conduct

Goldman Sachs has issued a lengthy rebuttal of claims by the New York Times that the bank's behavior in 2008 played a major part in American International Group's (AIG) near-collapse.

According to the article, in January 2008 Goldman Sachs became involved in a dispute with AIG related to complex mortgage security insurance.

AIG had paid $2 billion to cover potential default losses and its executives wanted some money back, stating that Goldman Sachs had overestimated how much could go unpaid.

However, Goldman Sachs officials stated the amount had actually been underestimated and demanded more money from AIG.

The dispute was not resolved but the New York Times claims that demands from Goldman Sachs damaged AIG, ultimately leading to its $180 billion bailout from the government.

"Well before the federal government bailed out AIG in September 2008, Goldman's demands for billions of dollars from the insurer helped put it in a precarious financial position by bleeding much-needed cash," said the newspaper.

"That ultimately provoked the government to step in."

It added that the Securities and Exchange Commission is now investigating Goldman Sachs' payment demands to AIG made during 2007 and 2008, and making enquiries surrounding similar demands made by a number of other companies to AIG.

The claims have provoked an angry response from the Wall Street firm, which took the step of issuing a point-by-point rebuttal of the allegations made against it.

"We requested the collateral we were entitled to under the terms of our agreements. The idea that AIG collapsed because of our marks is ridiculous," it said.

"In any event, the story later asserts that by the spring of 2008, AIG's dispute with Goldman Sachs was just one of its many woes."

The company attacked the newspaper's claims as contradictory and said that its "facts" did not stand up to serious investigation.

Hank Greenberg Tells WSJ Goldman Sachs Behind AIG’s Collapse

(Bloomberg) -- Hank Greenberg, former chief executive officer at American International Group Inc., said Goldman Sachs Group Inc. is responsible for the collapse of the insurer during the economic crisis, the Wall Street Journal reported.

“It certainly wouldn’t be difficult to come to that conclusion,” Greenberg is quoted as telling the newspaper yesterday.

Greenberg blamed new standards for credit-default swaps -- pushed by Goldman or Deutsche Bank AG, he said -- and subprime, housing-backed derivatives sold and then shorted by Goldman as contributing to AIG’s collapse, the newspaper reported.

Court approves distribution of $843m to harmed AIG investors

A US federal court has approved the distribution of over $843 million to investors harmed by a 2006 fraud case against insurance giant AIG.

The money will be distributed through a Fair Fund established by the Securities and Exchange Commission (SEC). Under the 2002 Sarbanes-Oxley Act, the regulator can use Fair Funds to distribute both illegally-obtained cash and civil settlements directly to the investors involved.

In a statement, the SEC said the AIG Fair Fund's court-appointed distributing agent estimates that checks will be sent to over 257,000 AIG shareholders over the coming months.

AIG was charged by the SEC with accounting fraud in February 2006. The regulator contested that between at least 2000 and 2005, the company materially falsified its financial statements and reported false and misleading information regarding its financial position.

The firm paid $800 million to settle the charges without admitting or denying any wrongdoing.

James Clarkson, acting director of the SEC's New York office, said: "The return of these funds to harmed investors is another example of our determined effort to protect investors from those who engage in corporate malfeasance."

Ex-AIG exec Christian Milton jailed over $500m fraud

A former vice-president of reinsurance at American International Group (AIG) has been jailed for four years for his part in a scheme that cost investors up to $597 million through a "sham transaction" that falsely inflated the company's share price and reserves.

Judge Christopher Droney also imposed a $200,000 fine on Christian Milton, who was convicted last year of conspiracy, mail fraud, securities fraud and making false statements to the Securities and Exchange Commission, the Associated Press reports.

The prosecution's case had argued that Mr Milton had taken part in a scheme whereby AIG secretly paid General Reinsurance to take out reinsurance policies with the company in 2000 and 2001.

Although Mr Milton did not directly benefit from the fraud, federal attorneys contested that he had a financial motive because his deferred compensation package was linked to the value of AIG's stock.

Judge Droney said: "He surely knew this was a scam from the very start. This was no momentary lapse in judgment."

Four former General Reinsurance executives have already been convicted for their role in the scheme. In December, ex-chief executive Ronald Ferguson was sentenced to two years in prison and a $200,000 fine for his part in the fraud.