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AIG Faces Probe on Contract

October 22, 2004|From Reuters

A federal grand jury is investigating products sold by insurer American International Group Inc. that companies might have used to make their earnings look better, the company said Thursday.

Meanwhile, insurance broker Marsh & McLennan Cos., so far the main focus of the growing regulatory scrutiny of insurance practices, got more bad news when Standard & Poor's cut its credit rating and said more cuts were possible. The cut probably will raise Marsh's borrowing costs.

New York-based AIG, the world's largest insurer by market value, said the Indiana jury probe centered on a contract with cellphone distributor Brightpoint Inc.

The U.S. Securities and Exchange Commission had accused AIG of helping Plainfield, Ind.-based Brightpoint fraudulently conceal losses with the policy. AIG settled with the agency last September for $10 million.

"I cannot explain why this arose now," AIG Chairman Maurice "Hank" Greenberg said during a conference call. "We're not looking for a fight. We've never done that. But the timing [was] certainly not by accident, given that we are putting out earnings today."

AIG disclosed the investigation one week after New York Atty. Gen. Eliot Spitzer accused Marsh of rigging bids and colluding with AIG and other insurers to fix prices on policies for large and mid-size employers. His probe has expanded to life and medical insurers.

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