It is beginning to look like the Feds think AIG (AIG) may have misled investors when it valued some of the securities it held. Is it OK to cover-up earnings numbers? Perhaps AIG thought it would work if they didn’t get caught.
According to The Wall Street Journal, the SEC is looking into whether AIG "overstated the value of contracts linked to subprime mortgages." Now the Justice Department wants to have a look.
It is understandable that AIG would want to have its paper look as good as possible. It did loses $20 billion in the last quarter.
It is not clear who within AIG may have been involved in handling the valuations and the calculations which led to them. Sometime, somewhere, that is almost certain to come out.
AIG now faces a new category of threat. It will have to argue that its management was unusually stupid or defend itself against shareholders who may claim that the firm committed fraud.
Being stupid is better.
Douglas A. McIntyre