AIG FACES AUDIT OVER COMP:

The state insurance department is appointing a consultant to audit years of alleged improper booking of workers’ compensation premiums at American International Group. New York Attorney General Eliot Spitzer and Insurance Superintendent Howard Mills announced that the practice to be audited, now apparently discontinued, involved booking premiums for workers’ comp coverage as premiums for general liability coverage. The conduct appears to have taken place for over a decade, and continued even after AIG insiders challenged its legality.

By reportedly booking the income as something other than workers’ comp premiums, AIG might have avoided paying its true share into various workers’ comp funds. One AIG document dating from the early 1990s reportedly estimated the benefit to AIG at tens of millions of dollars annually.

In 1992, an internal AIG legal memorandum to top management reported that the practice was illegal. This followed similar warnings made years earlier. It reportedly remains unclear when the practice stopped.