American International Group Inc, the insurer seeking an exit from US ownership, was told by regulators to extend the period of oversight imposed as part of a $1.64 billion (Dh6.02 billion) fraud settlement in 2006.
Therese Pritchard's term as independent consultant overseeing AIG has been extended through the end of the year, she said. Her duties were set to expire yesterday, according to the insurer's regulatory filings.
Chief Executive Officer Robert Benmosche is working to distance AIG from legal disputes under previous leaders and restore confidence in the company as he seeks private capital to replace government bailout funds. The New York-based insurer disclosed a weakness in accounting for credit-default swaps in 2008 and said in February that a shortfall in reserves led to a charge of about $4 billion.
AIG "was the frontrunner in the crisis that occurred," Phillip Phan, professor at the Johns Hopkins Carey Business School in Baltimore, said in a telephone interview.
"That doesn't allow them complete freedom yet, until they can be sure that the corporate governance has been put in place."
Pritchard's term was extended to document how AIG implements so-called best-practice recommendations, according to a person familiar with the matter.
She's scheduled to complete the last stage of monitoring, said the person, who declined to be identified because there has been no public statement about the firm's progress on the requirements.
Joseph Norton, a spokesman for AIG, didn't immediately respond to a message seeking comment outside of regular business hours.
Florence Harmon, a spokeswoman for the US Securities and Exchange Commission, declined to comment.
AIG agreed to hire the consultant, acceptable to the SEC, for a three-year term as part of a 2006 fraud settlement with regulators including then-New York Attorney General Eliot Spitzer, who accused the company of rigging bids, duping shareholders and underfunding workers' compensation pools. The consultant was assigned to make recommendations for improving the insurer's regulatory compliance and internal auditing.
James Cole, now the nation's No 2 Justice Department official, was appointed as AIG's independent consultant in 2005 after the insurer agreed to pay $126 million to settle SEC allegations it helped clients such as PNC Financial Services Group Inc inflate profits. The monitoring duties were expanded after the Spitzer accord.
The job is now held by Pritchard, a partner at Bryan Cave LLP, where Cole previously worked.
Cole was confirmed as the US Justice Department's deputy attorney general this week after President Barack Obama appointed him during a recess in December. Senate Republicans in May blocked a vote to confirm Cole after criticising his approach to terrorism and his AIG role.
The insurer was bailed out in 2008 after misjudging the risk of losses from investments tied to subprime mortgages.
From / Gulf News