A Question for A.I.G.: Where Did the Cash Go?

[seemslikeadream]

http://www.nytimes.com/2008/10/30/business/30aig.html?_r=4&ref=business&oref=slogin&oref=slogin&oref=slogin&oref=slogin


The American International Group is rapidly running through $123 billion in emergency lending provided by the Federal Reserve, raising questions about how a company claiming to be solvent in September could have developed such a big hole by October. Some analysts say at least part of the shortfall must have been there all along, hidden by irregular accounting.


Sandy Huffaker for The New York Times
Donn Vickrey, a forensic analyst, is skeptical of A.I.G.’s past reports. “You don’t just suddenly lose $120 billion overnight,” he said.


Brendan Smialowski for The New York Times
Martin Sullivan, left, former head of A.I.G., with Lynn Turner of the S.E.C. at a House hearing.
“You don’t just suddenly lose $120 billion overnight,” said Donn Vickrey of Gradient Analytics, an independent securities research firm in Scottsdale, Ariz.

Mr. Vickrey says he believes A.I.G. must have already accumulated tens of billions of dollars worth of losses by mid-September, when it came close to collapse and received an $85 billion emergency line of credit by the Fed. That loan was later supplemented by a $38 billion lending facility.

But losses on that scale do not show up in the company’s financial filings. Instead, A.I.G. replenished its capital by issuing $20 billion in stock and debt in May and reassured investors that it had an ample cushion. It also said that it was making its accounting more precise.

Mr. Vickrey and other analysts are examining the company’s disclosures for clues that the cushion was threadbare and that company officials knew they had major losses months before the bailout.

Tantalizing support for this argument comes from what appears to have been a behind-the-scenes clash at the company over how to value some of its derivatives contracts. An accountant brought in by the company because of an earlier scandal was pushed to the sidelines on this issue, and the company’s outside auditor, PricewaterhouseCoopers, warned of a material weakness months before the government bailout.

The internal auditor resigned and is now in seclusion, according to a former colleague. His account, from a prepared text, was read by Representative Henry A. Waxman, Democrat of California and chairman of the House Committee on Oversight and Government Reform, in a hearing this month.

[Rosa Luxemburg]

1. well...here

http://www.huffingtonpost.com/2008/10/07/aig-congressional-hearing_n_132614.html

[seemslikeadream]

2. SEE NO EVIL

SEE NO EVIL




SEE NO EVIL


AIG's former CEO Martin Sullivan ignored the resignation of an auditor who was looking at the insurer's derivatives unit, a congressional investigation alleged.

AIG's auditor scandal
Insurer could have avoided demise if it focused on swaps-unit claims by auditor, who resigned after being denied access, lawmaker charges



By Neil Roland
October 12, 2008 12:01 AM ET

American International Group might have averted disaster if its top executives had paid attention to an internal auditor sniffing around the edges of the insurer's derivatives unit, a congressional investigation found last week.

Instead, they turned away when the highly regarded auditor, a former assistant chief accountant in the SEC's enforcement division, resigned after being blocked from access to the unit's finances by its London-based chief, House Oversight and Government Reform Committee chairman Henry Waxman said.

The findings undercut the contentions of former chief executives Martin Sullivan and Robert Willumstad that the insurance giant was lashed by economic forces and regulatory policies outside its control.

The House panel's investigation found no record of the auditor's resignation in the notes of any board meetings, although the matter had been brought to the board's attention, the California Democrat said.

“It looks like you both brushed it aside,” Mr. Waxman told the former CEOs at a hearing. “He could have given you information that later brought AIG to its knees.”

The disclosures suggest the possible role of mismanagement or even fraud in the demise of the New York-based company that was once the world's largest insurer. It was taken over by the federal government last month, has received $122.8 billion in federal loans, and is trying to sell assets.

Federal investigations disclosed in June are looking into whether AIG executives misled investors about the value of credit default swaps tied to subprime mortgages. The swaps, contracts sold to investors to insure against bond defaults, have led to billions of dollars in AIG write-offs.

[Rosa Luxemburg]

3. we need wealth from these people not to these people

we have it the wrong way round