Congress has deftly avoided the real story of AIG’s collapse, which will make a few million in bonuses seem like peanuts.
Most legislators at a House Finance subcommittee hearing last week deftly avoided the real story of AIG’s collapse. Instead, they homed in on the public relations disaster of hundreds of top AIG officials and staff getting $165 million (later revealed as over $218 million) in bonuses.
The key issue ignored by the congressmen and women was the potential catastrophe represented by as much as $2.7 trillion in AIG derivative contracts and how AIG and the U.S. government are dealing with them. To put that number in context, we’ve so far provided the company only about $170 billion.
American International Group (AIG) operated a captive insurance scam that involved fraudulent use of offshore tax havens. Currently, the U.S. government has invested over $40 billion in AIG, with the U.S. getting nearly 80 percent of its stock.
This puts the U.S. in a unique position to investigate the internal operations of a giant corporation with a reputation for using the offshore system for tax evasion.
U.S. authorities could begin their investigations with a look into a very curious practice that was revealed 15 years ago in a case that was never exposed by the mainstream press and which insurance insiders say is endemic.
AIG would keep a portion of a client’s inflated insurance premium and send the rest to the client’s offshore reinsurance company. AIG would earn a higher commission. The client would write off the entire amount as a business expense and enjoy the extra cash offshore, tax free.
This story tells how notorious fraudster Victor Posner made an AIG deal to stash reinsurance profits in Bermuda.
Maurice “Hank” Greenberg, one of the world’s richest men, and head of AIG, one of the world’s largest financial companies, was forced to resign this week as prosecutors closed in on him and the company.
Given his economic and political power, the fall of Maurice “Hank” Greenberg, the 59th richest man in America and CEO of the American International Group (AIG), the world’s second-largest financial conglomerate (after Citigroup), is stunning.
How insurance companies are aiding tax evasion by over-charging in America and shipping the money to offshore firms.
Terry Mills was working in Wilmington, DE, for J. Montgomery, one of the largest insurance agencies in the region, when in 1993 he was called in to get to the bottom of a messy insurance problem. Little did he know that he would uncover a story – as yet unreported – about tax evasion through offshore firms, but with a twist. The scheme Mills came across seemed to be taking place with the aid of AIG, a major U.S. insurance giant.
In October, New York Attorney General Eliot Spitzer filed suit against the world’s largest insurance broker, Marsh, accusing it of rigging bids and receiving kickbacks in order to defraud clients such as other corporations, city governments, school districts and individuals of billions of dollars through inflated premiums.
“Greedy trial lawyers were the usual excuse for premium increases. Now we know that greedy corporations also have a starring role,” Spitzer said, accusing several insurance companies as co-conspirators in making phony or inflated bids and paying kickbacks to the brokerage to get business.