3. AIG Scandal 2005

AIG Accounting Scandal

By: Ghazanfar Ali Zafar Rahmat

Introduction

AIG, American International Group Inc., is one of the top multinational insurance corporations. Its primary activities include General Insurance and Life Insurance & Retirement Services AIG, with asset of 556 illion, provides insurance service for more than !5" different countries and it has over 6#", """ employees over the world. According to the 2008 Forbes Global 2000 list, AIG was once the 18th-largest public company in the world. $ven thou%h AIG is such a %iant corporation, it has encountered financial prolems in the early """s. 'nder financial pressure and a lac( of internal control, AIG have committed frauds resultin% in several scandals. )ne of the accountin% scandals was disclosed durin% ""5 which involved a material mis*statement due to false transactions durin% """. +his scandal set to prelude leadin% the downfall of AIG in "".

The Accounting Scandal The Players

+he -$) of AIG was aurice /0an(1 Greener%. Greener% 2oined AIG in !36 and led AIG for thirty ei%ht years until his retirement in arch ""5. Greener% was not only the -$), ut also the chairman of the oard of AIG. AIG also have several susidiaries, which include 4ational 'nion ire Insurance -ompany of ittsur%h 74'I-8 and 0artford Steam 9oiler Inspection 70S98. +heir financial information are consolidated in AIG:s financial statements. +he scandal also involves another corporation General Re -orporation. General Re is a susidiary of 9er(shire 0athaway, Inc., an investment %roup run y the  illionaire ;arren 9uffet. General Re also has susidiaries all over the world and to%ether and it is one of the i%%est reinsurance companies in the ;orld. Reinsurance companies are entities that insure the insurance companies. +hey help insurance companies share ris( y sellin% reinsurance plans that would help  pay off a share of a claim from the insurance companies. +he -$) of General Re was Ron er%uson when the fraud was committed. General:s R$ susidiary in