| The world's largest insurer caught in fraud American International Group Inc. (AIG), the world's largest insurance company by market capitalization, is accused of financial fraud and will be fined $10 million. The US Securities and Exchange Commission (SEC) caught AIG using insurance schemes to cut losses at mobile phone distributor Brightpoint and accessories for mobile communications. According to the SEC decision, Brightpoint itself will pay a $450 thousand fine.
According to The New York Times, AIG provided Brightpoint with a $12 million insurance credit, which, according to the commission, allowed the company to reduce its 1998 losses of $29 million. Indeed, sometimes with the help of insurance against unexpected losses, companies can smooth out fluctuations in your financial performance. According to SEC officials, the use of such insurance schemes can be justified as a tool for spreading risks, but in no case as a mechanism for possible deception of investors.
Brightpoint, representatives of the commission believe, tried to show that it was working more successfully than it actually was. Having received $12 million in insurance credit, the company then paid $12 million in premiums for three years. This allowed Brightpoint to spread the loss evenly over a three-year period.
The commission that AIG received from the deal ($100 thousand), the insurer is obliged to return to the federal authorities. As Mark Schoenfeld, the SEC member investigating AIG and Brightpoint, noted, "AIG will pay a fine of 100 times the commission -- a total of $10 million." According to him, the commission has no more questions for the insurance company, however, the SEC is studying the operations of other insurers in similar transactions. Analysts at Western investment companies advise investors to refrain from panic, but do not deny that the incident with AIG and Brightpoint could be repeated. "We doubt this is an isolated incident," says Morgan Stanley analyst Vinay Saki, "but we don't expect an influx of similar cases." Alexey ROZHKOV |
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