AMERICAN INTERNATIONAL GROUP, INC.

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GROUP 6

JOANA MAE FAYE SHEHAN

DULAY FLORES

BS AIS BSA
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PATRIZ
RICA MAMACLAY
FOLLOSCO

BS AIS BSA
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REGIE ANN
PADIWAN

BS AIS
COMPANY BACKGROUND
AMERICAN INTERNATIONAL GROUP, INC.
Cornelius Vander
Starr
A former ICE CREAM
PARLOR OWNER

FOUNDER: AMERICAN
ASIATIC
UNDERWRITERS IN
SHANGHAI, CHINA
 SUBSIDIARIES
ONE OF THE ITS
HEADQUARTER • MORE
WORLD’S PRODUCTS
IS IN THAN 165 IN
LARGEST US ARE SOLD IN
INSURANCE NEW YORK CITY • MORE MORE THAN
FIRMS THAN 340 IN 80
55 OTHER COUNTRIES
COUNTRIES
 PRIMARY SEGMENTS
GENERAL INSURANCE

PERSONAL 2/3
LINES PROVIDES COMMERCIAL AND
PERSONAL PROPERTY/ CASUALTY
GENERAL AND INSURANCE
PROFESSIONA
L LIABILITY
PRODUCTS
ACCIDENT
AND HEALTH
COVERAGE

COMMERCIAL
PROPERTY

20%
SPECIA
L RISK
30%
 LIFE AND RETIREMENT

LIFE
INSURANC
E
35% OF
INSTITUTIONA SALES
L PRODUCTS

RETIREMENT

20%

30%
 OTHER OPERATIONS SEGMENT

AIG’S
TECHNOLOGY
SUBSIDIARY
BOARD

VARIOUS
ADMINISTRATIV
E
UNITS

20%

30%
AMERICAN INTERNATIONAL
GROUP SCAM (AIG SCAM)
 PERSONAL
CHARACTERISTICS
SITUATIONAL
PRESSURES

THE
FRAUD
TRIANGLE

AVAILABLE
OPPORTUNITIES
 PROBLEM:
AIG loss revenue of approximately
$60 million

• created TWO SHAM

REINSURANCE
TRANSACTIONS of $250
million each.
• IMPROPERLY added loss
reserves to AIG’s balance

D
D D
sheet

D
• Arranged transactions to

D
 FIRST CASE PENALTY
• SEPTEMBER 2003, AIG was • $10 million civil penalty
accused of FRAUD by SEC
• OCTOBER 2004, the office of
Attorney General along with the PENALTY
Justice Department sued AIG • $126 million on the criminal
among various companies for charges
BID RIGGING
 PERSONAL
CHARACTERISTICS
SITUATIONAL
PRESSURES

THE
FRAUD
TRIANGLE

AVAILABLE
OPPORTUNITIES
WHO WERE
INVOLVED?
AMERICAN INTERNATIONAL GROUP, INC. CASE
Maurice “Hank” R. Greenberg
WHO ROLE
• Former CEO • Restated
of AIG AIG’s profits
• CEO for 38 • Deceived the
years regulators
• Abused the
accounting
irregularities
 Ronald E. Ferguson
WHO ROLE
• CEO of GRC • Improperly
from 1987 to added loss
2002 reserves to
AIG’s
balance
sheets
CAPCO Reinsurance Company
WHO ROLE
• Subsidiary of • Arranged
General transactions
Reinsurance to underwrite
Company losses for
(GRC) $200 million
Pricewaterhouse Coopers LLP Auditor
WHO ROLE
• Audit AIG’s • Signed off
financial the Financial
statements Statements
of AIG
HOW AIG RESPONDED
TO THEIR ISSUES
 AIG restated its
earnings by more
than $3.5 billion
•$800 million-
investors
•$375 million to AIG
policyholders
•$344 million- states
 AIG will pay $800
million, including
$100 million as a
penalty
$375 million will be paid into a fund
under the supervision of the NYAG and
the DOI
 Approximately $375
million to
compensate each of
the 50 states
$100 million to the State of
New York
$25 million in connection with
the DOJ settlement
 ONE

DISTRIBUTION
OF POWER

TWO
HOW TO
REMOVAL OF DEAL
HIERARCHY WITH
THIS?
 THREE

RISK
ASSESSMENT
HOW TO
AND DEAL
MANAGEMENT
WITH
THIS?
 FOUR

SELECTION OF
AUDITING
COMPANY HOW TO
DEAL
WITH
THIS?
 THE
MORAL
Had the management of AIG been FAILURE
working under any sort of ethical
framework, based on what is right,
valuing the principles of honesty,
fairness, justice and respect, this would
not happen. Every corporate fraud is
disregard of moral values against wealth
and greed for earning it. What happened
in this case was exactly the opposite of
utilitarianism. The executives of AIG put
their own interests on such a prioritized
position that the rights of and the harm
being caused to the shareholders did
not bother them. (Bhatt, 2019)
 THE
MORAL
The ethical error lies on the
FAILURE
part of GRC as well. The
company needed to be true to
its job. Without the support of
GRC, it would have become
almost impossible for AIG to
pull up this fraud for this long
period of time. (Bhatt, 2019)
 Bhatt, A. (4 September, 2019) American International Group Scam:
Attempt by the USA government to protect its darling. Company
Ninja. https://thecompany.ninja/american- international-group-scam/

AIG Settles Fraud, Bid-Rigging and Improper Accounting Charges with

SEC, N.Y. Insurance Journal.
https://amp.insurancejournal.com/news/national/2006/02/09 /65212.htm
REFERENCES
American International Group, Inc. Vault.https://www.vault.com/company-
profiles/insurance/american-international-group-inc

Scribd.https://www.scribd.com/doc/245889757/AIG-Scandal-2005

Case study on Business Ethics: The AIG Scandal – MBA Knowledge

Base. MBA Knowledge Base.
https://www.mbaknol.com/business-ethics/case-study-on-
business-ethics-the-aig-scandal/?amp
White,G.(26 January, 2010).The 16 Players to Blame for AIG Fiasco.
Business Insider. https://www.businessinsider.com/the-15-
sulprits-at-the-heart-of-the-aig-bailout-fiasco-2010-1
https://youtu.be/-JLlo3eQT1E

https://youtu.be/M3eU0uuzBBw

https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.businesswire.com%2Fnews%2Fho
me%2F20210715005996%2Fen%2FAIG-to-Report-Second-Quarter-2021-Results-on-August-5-2
021-and-Host-Conference-Call-on-August-6&psig=AOvVaw2KulXqUH9Ad0R7Zr-Pt361&ust=162
6938269795000&source=images&cd=vfe&ved=0CAsQjRxqFwoTCMCF3MrP8_ECFQAAAAAdAA
AAABAR

https://en.wikipedia.org/wiki/Cornelius_Vander_Starr#/media/File:Cornelius_Vander_Starr.jpg
Thank You