[JURIST] Former American International Group (AIG) [corporate website] executives on Thursday agreed to settle [press release] a suit [complaint, PDF] brought by the US Securities and Exchange Commission (SEC) [official website] alleging their involvement in inflating the company's reported financial records. The SEC accused former CEO Maurice Greenberg and former CFO Howard Smith of being "control persons" under the Securities Exchange Act [text], making them liable for AIG's securities law violations. The SEC claimed that the two executives made false statements which allowed the company to misrepresent key earnings between 2000 and 2005. Greenberg will pay $15 million in disgorgement and penalties without admitting any charges [statement, PDF] to "put these issues behind him," while Smith will settle for $1.5 million.
The recent economic downturn has led to numerous SEC financial fraud suits and improved legislation. On Tuesday, General Electric Co. (GE) agreed to settle [JURIST report] for $50 million an SEC suit which alleged that the company misled investors in regards to its financial statements. Earlier this week, Bank of America (BOA) settled an SEC suit [JURIST report] for $33 million after being accused of misleading investors about billions of dollars paid to Merrill Lynch executives during the acquisition of the firm. Like Greenberg, BOA and GE did not admit to the allegations. In May, the US House of Representatives [official website] approved the Fraud Enforcement and Recovery Act [S 386 materials] to investigate the economic crisis and to allocate additional resources [JURIST report] for federal prosecutors to pursue financial fraud cases. In response to large bonuses paid to AIG employees, the House passed a bill [HR 1586 materials, JURIST report] in March that would set a 90 percent tax for employee bonuses of companies which received government stimulus money.