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A Quasi-random Corporate Rant New York, November 29, 1999 — Great news readers! There is a fantastic announcement in this week's issue of Barron's (The Dow Jones business and financial weekly). It seems that "a Binding Heads Agreement has been signed between Conquistador Mines Ltd and Anglogold South America Limited for a regional exploration project on the [Conquistador's] currently held gold properties in Colombia...[T]he aim of this joint venture is to discover and develop a major economic orebody." It's nice to see that after some 500 odd years the Spanish and English are finally working together to steal gold and land in the Western Hemisphere. Conquistador, what a fantastic name for a South American mining company. Now, I'm hardly one to read Barron's on a regular basis. Yet, by circumstance, I happen to have read this week's AND last week's issues. The first instance was relatively random; I was about to hop a shuttle flight from New York to Boston, and needed something to read. Since the shuttles always have complementary reading material, I picked up a magazine called Reason and a copy of Barron's. It was either that or golf magazines and Arthritis Today (no joke). The first article I read in Reason (a magazine which bears the tagline "Free Minds and Free Markets"), disturbed me intensely. It was a pro-biotech hack piece who's author called anyone with reservations about budding biotechnologies as "pro-death." That was about all I could handle of that. So I leafed through Barron's for the rest of my flight. The second Barron's instance began this morning. Again, I was en route to public transportation (this time it was my daily subway ride to Midtown), and needed something to read. The Daily News and The New York Post headlines looked pretty lame, I wasn't in the mood to read the Wall Street Journal, and I gave up reading The New York Times years ago when I grew weary of their blatant editorializing, and annoyed by their television ads.
I picked Hank up, stuck him in my armpit, and reached for $3.50 to give to the owner of the store. I can never resist the opportunity to read about my former place of work; its always amusing read the lies that only an insider can identify. Besides it is in my interest to know what's going on there. Indeed, despite my scorn for the institution itself, I am a stock holder for god's sake (it was the one deal they gave me I couldn't resist). The article spouted the usual Wall Street laudations of AIG's unrivaled success. AIG is America's largest underwriter of commercial property and casualty insurance, and writes policies in more countries around the world then any other insurer. It boasts over 2000 subsidiaries worldwide, and is worth approximately $170 billion. Blah blah blah.
As you might have guessed, I was not one of those 500. AIG has an extremely high employee turnover rate. My co-worker had been there for 7 years and had worked under six bosses and four different General Counsels (Law Dept. heads). "AIG strives to have the lowest costs in the industry...keeping its organization lean." They're lean alright! Shit, during my last year there I did the work of an attorney AND a paralegal, when I didn't even receive a competitive salary for the latter position. But, you see, it's not just the employees that get reamed. AIG swindle their customers. One anonymous industry observer says in the Barrons article that "[i]f Hank can get away with it, and sometimes he does, AIG will try to sell companies yak-bite insurance with a Tibetan exclusion." If selling snake oil isn't enough, there's always downright stealing. AIG is so notorious for refusing to pay claims that "[t]he old saw in the industry is that a company with a major loss should call its lawyer before filing a claim with AIG." Well, I don't know what we've learned here, but I've sure enjoyed spewing some AIG shit. I could go on and on about that company, but I won't (partly because of attorney-client privilege, partly because I still own my AIG stock — a whopping 24 shares). HAPHAZARD UPDATE (2005): AIG and Hank have been getting into a mess of trouble lately. I knew its managers, like most corporate executives were scoundrels, thieves, and fraudsters. The below timeline of AIG was compiled information on The Wall Street Journal. You might want to skip to the scandals in 2004-5. First, this introduction, from a p. 1 article in the March 31, 2005 WSJ, "Rewriting the Books: AIG Admits 'Improper' Accounting": Amid the wave of financial scandals that have toppled corporate executives in recent years, AIG's woes stand out. Unlike Enron, WorldCom and HealthSouth — all highfliers that rose to prominence in the 1990s — AIG has been a solid blue-chip for decades. Its stock is in the Dow Jones Industrial Average, and its longtime chief, Maurice R. "Hank" Greenberg, was a globe-trotting icon of American business. Civil and criminal probes already have forced the departure of the 79-year-old Mr. Greenberg after nearly four decades at AIG's helm. Investigators are closely examining the actions of Mr. Greenberg and several other top AIG officials who have quit or been ousted in recent days, including its former chief financial officer; the architect of its offshore operations in Bermuda; and its reinsurance operations chief. In addition, the Securities and Exchange Commission could eventually bring civil-fraud charges against the company or executives. AIG Scandal Timeline 1967 1989 1995 1997 1998 2000 September: Evan Greenberg quits AIG, and later is
named vice chairman at Ace Ltd. He is named president and CEO of Ace in
2004. 2001 2004 October: New York Attorney General Eliot Spitzer
charges Marsh & McLennan with cheating corporate clients by rigging
bids and collecting huge fees from major insurance companies for throwing
business their way. The civil complaint names AIG, Ace Ltd., Hartford
Financial Services Group and Munich-American Risk Partners as participants
with Marsh in paying improper fees and bid rigging. November: It is reported that the SEC and the U.S.
Attorney's office in Manhattan are investigating whether Mr. Greenberg
manipulated the price of AIG shares while the company was working to close
an acquisition in 2001. November: AIG agrees to a $126 million settlement
with federal prosecutors and the SEC to settle an investigation into whether
the insurer helped PNC Financial Services Group Inc. commit accounting
fraud. 2005 February: Three more insurance-industry executives
plead guilty to criminal charges stemming from a bid-rigging probe. Joshua
Bewlay, a Marsh executive, pleads guilty to a felony count of scheme to
defraud; John Mohs, a manager in an excess-casualty-insurance underwriting
unit at AIG dedicated to working with Marsh, pleads guilty to scheme-to-defraud
in the first degree; and Carlos Coello, a former AIG underwriter, pleads
guilty to a misdemeanor charge of scheme to defraud. February: It is reported that regulators are scrutinizing
a deal struck between AIG and Berkshire Hathaway's General Reinsurance
unit four years ago — in which AIG added hundreds of millions of
dollars of claims reserves to its balance sheet, in return for cash premium
payments — to determine if it was aimed at making the giant insurer's
reserves look healthier than they were. March: Mr. Greenberg retires as CEO of AIG, but
will remain chairman of the board. He is succeeded by Martin Sullivan,
a co-chief operating officer and a vice chairman. March: It is reported that AIG's board is considering
severing ties with Mr. Greenberg altogether, perhaps ending his role as
nonexecutive chairman by May. March: It is reported that an AIG accounting review
uncovers some figures that may have to be adjusted. March: AIG fires two top executives after they signaled
they would plead the Fifth Amendment in interviews with regulators. Howard
I. Smith, chief financial officer, and Christian M. Milton, a vice president,
were the execs terminated. March: The Securities and Exchange Commission subpoenas
to as many as 12 AIG executives amid the probe to determine whether the
company used questionable transactions to bolster its financials. March: Hank Greenberg retires as AIG's nonexecutive
chairman, succumbing to pressure from investigators.
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So, I stood at the newsstand staring at the Post, the Journal,
and the News for about 45 seconds, before giving up on all of them.
Then I saw it: The CEO of AIG was on the cover of Barron's.
There sat Hank Greenberg, staring at me with that smarmy, closed-mouth
smile he always wears. (ALWAYS. 
What was really interesting, however, is that for once this article unabashedly
described the secret of AIG's success — thievery: "AIG runs
a low-overhead operation with niggardly base salaries for the bulk of
its employees. Only the top-producing 500 or so of AIG's employees
end up being lavishly rewarded, with big salaries, hefty option packages
and lucrative grants of stock and other goodies..."