AIG faces possible SEC civil action

American International Group (AIG) announced this week it has received notice from the U.S. Securities Exchange Commission (SEC) that it may face a civil action for alleged violation of federal securities laws.
SEC staff are recommending the action against AIG and its AIG Financial Products Corp. (AIGFP) relative to an investigation of transactions between an AIGFP subsidiary and PNC Financial Services Group between June, 2001 and November, 2001.
AIG says it will respond to the notice, also known as a “Wells notice”, as allowed for under SEC procedures. In a statement, the world’s largest commercial insurer says it feels the proposed charges are “unwarranted”.
The SEC has already reached a settlement with PNC which involved the financial services firm paying US$115 million in restitution and penalties. The SEC said PNC had overstated its earnings in 2001 after it transferred troubled loans valued at more than US$750 million off its balance sheets. The loans were transferred to three entities in which PNC held an ownership stake, but which were sponsored by the insurer, SEC filings from 2002 allege.