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“DAVE: ‘Now, let’s turn to the subject of insurance giant AIG, the focal point of two of your Alternet articles. Tell us about the company’s size & importance in the industry & the corporate landscape in general.’
‘LUCY: ‘AIG is the world’s second largest financial conglomerate & the largest underwriter of commercial & industrial insurance.
In 2003, AIG reported net income of $10 billion. It has $648 billion in assets, a market value of $195 billion, $77 billion in sales & $6.5 billion in annual profits. It has operations in 130 countries & nearly 77,000 employees. It ranks third on Forbes’ list of the world’s biggest companies, after Citigroup, & General Electric.”
3. AIG & its CEO Maurice [“Hank”] Greenberg are very closely related w/the intelligence community.
“DAVE’ ‘Tell us about AIG chief Maurice [Hank] Greenberg, & his relationship to the intelligence community.’
‘LUCY: ‘The American International Group at its origins was linked to the OSS (Office of Strategic Services) the forerunner of the CIA.
It grew from the Asia Life/C. V. Starr [also see: AIG. Conspiracy Theories of the World Unite’, www.abovetopsecret.com... )companies founded by Cornelius Starr who started his insurance empire in Shanghai in 1919, the first westerner to market insurance in China. Starr served w/the OSS during World War II, & the Starr Corporation, located in the same building as the OSS in New York, provided intelligence on shipping, manufacturing & industrial bombing targets in Asia & Germany.
When Casey became CIA director in the Reagan Administration, he wanted Greenberg to be his deputy, but Greenberg decided to stay w/AIG. After the Ames scandal, Sen. Spector floated his name as a replacement of Woolsey, but the job went to Tenet.’” (Idem.)
4. AIG features a number of luminaries on its board of directors & international advisory boards:
“DAVE: ‘Tell us about some of the prominent people on the board of directors & international advisory boards of AIG.’
Its board of directors includes William S. Cohen, Former U.S. Secretary of Defense & Senator, Caria A. Hills, Former U.S. Trade Representative, Richard C. Holbrooke, Former U.S. Ambassador to the United Nations.’’ (Idem.)
LUCY: ‘Henry Kissinger chairs AIG’s International Advisory Board.
5. AIG’s illegal and/or unethical stratagems feature a pioneering use of “captives.”
“DAVE: ‘Let’s turn to the subject of what AIG does. What are ‘captives’ & how does AIG use them?’
LUCY: ‘A captive is an insurance company that is owned by the company it insures - & has that company as its only client. Reinsurance is insurance that an insurance company buys so that if it has to pay out a claim, it doesn’t take all the risk.
I discovered & reported on a case where AIG used a reinsurance company secretly owned by its client’s CEO to help him evade taxes, & by the way, to increase AIG profits in a way that cheated the client’s stockholders. I wrote about the case on Alternet, but it has not been reported in the corporate press.
6.Of course, this did nothing to damage the price of its stock.
AIG also used offshore insurance interests to move debt off its books, thereby making the company appear to be more profitable than it actually was.
“DAVE: ‘What else did [does] AIG engage in that was illegal?’
LUCY: ‘In the late 90s, four state insurance departments New York, Delaware, Pennsylvania & California were aware that AIG was moving debt off its books via the use of an offshore insurance company it secretly set up & controlled. But despite clear evidence of wrongdoing, no sanctions were ordered. State laws require insurance companies to keep a certain amount of capital available to pay out claims. If they have reinsurance, that amount can drop. The reinsurer, of course, has to be an independent company; the risk isn’t reduced if it’s just moved to another division of the same company.’” (Idem.)
–[ I’ll be posting another post, called, ‘AIG offshore subroutines for CLEARSTREAM criminal enterprise & tax evasion’ in about 30-40 min, and will post it’s url, here.]
insurance giant AIG & its prolific use of “offshore” scams.
He told me that ‘AIG was not involved in the offer & sale of Coral Re’s shares. That was done by Goldman Sachs, which approached potential investors w/which it had relationships. AIG did not control or have an equity interest in Coral Re.’ That of course it completely untrue. Goldman Sachs failed to respond to inquiries about its role in setting up Coral Re. In May this year (2005), New York State Attorney General Eliot Spitzer filed suit against AIG & Greenberg, charging a pattern of fraud through the use of ‘sham transactions’ that bolstered the conglomerate’s financial statements.” (Idem.)
Dave Emory: In addition to presenting AIG’s pioneering development of “captive” reinsurance companies to launder profits & evade taxes, the program highlights AIG’s use of Coral Reinsurance for a variety of illegal gambits. It should be noted that AIG’s illegal operations have been aided by a number of powerful & influential people.
links of AIG to the intelligence community; assistance given to AIG’s scams by luminaries such as Henry Kissinger & former Secretary of the Treasury Richard Rubin; Clearstream’s use of unregistered accounts; the role of the Clearstream network in the Banco Ambrosiano, October Surprise & BCCI scandals; the role of the Clearstream network in the financing of Al Qaeda & 9/11; the role of the Clearstream network in the machinations of the Russian criminal networks of Mikhail Khordokovsky; discussion of the “Bermuda Inversion” gambit; discussion of “Transfer Pricing;”
7. The program turns to the subject of AIG’s Coral Re gambit, & the considerable assistance provided by investment firm Goldman Sachs to the furtherance of this scam: “‘In the mid-80s, two of AIG’s reinsurers failed. AIG now was going to show unacceptably high levels of debt on its books from claims it would now have to pay out itself.
So Hank Greenberg decided to set up Coral Re, a reinsurance company, to move his bad debts off AIG books.
It set up a shell company in Barbados, where capital requirements & regulation was minimal compared to the U.S., where American regulators couldn’t readily discover AIG’s involvement & where, as an added incentive, it could move money out of reach of U.S. taxes.
The scam company was arranged w/the help of Goldman Sachs then headed by Robert Rubin, who would become President Clinton’s Treasury Secretary & is now chairman of the executive committee of Citigroup.
It got some high-level corporate executives to front for this supposedly independent company. But I have a confidential memorandum by Goldman Sachs which told why the company was formed. ‘AIG’s interest in creating the company is to create a reinsurance facility which will permit its U.S. companies to write more U.S. premiums.
For a U.S.-domiciled company, a high level of surplus is required to support insurance premiums in accordance w/U.S. statutory requirements. The statutory requirements in Barbados are less restrictive.’ The people who got this memo were corporate executives who, in exchange for their names, were offered a guaranteed return of $25,125 in the first year & $45,225 each subsequent year.
They didn’t have to put up any money: they got financing from Sanwa Bank of Chicago secured by the Coral Re shares, a guarantee of enough dividends from Coral Re to cover the interest, & agreement they could hand off the shares & debt whenever they chose. Who got this no-lose so-called investment? They included serving or former chairmen of Reynolds Metals; Kraft; Itel, Mennen Company; Morton Thiokol.
The Arkansas Finance & Development Authority, headed by a man who went to work in the Clinton White House, became lead investor, although state law banned it from buying stocks. Clinton was then governor of Arkansas. He would make Rubin his Treasury Secretary. The new company was not a legitimately independent business. For investors, there was no money at risk; the board of directors never made a decision; & Coral Re had no office of its own but was managed by American International Management, a subsidiary of none other than AIG.
Eventually, the scheme unraveled. In 1992, Delaware examiners smelled a rat, AIG initially refused to provide Coral Re documents to the examiners, & it took them a couple of years to nail the connection. When AIG finally supplied Coral Re’s financial papers, the regulator was incredulous. He told me,
‘The [AIG] books were definitely cooked.’
But the cowardly regulators in Delaware, Pennsylvania, New York & California, though they agreed in 1996 that AIG owned Coral Re & that there was no transfer of risk, did not act to punish AIG, just told it to stop using Coral Re. If Coral Re was an AIG affiliate, it would have to pay taxes on its income. If it was ‘independent,’ that money came tax-free. But the IRS didn’t have the guts to go after them, either. AIG spokesman Andrew Silver simply denied the validity of what all the insurance commissions found.
Victor Posner, who died in 2002, was a crook known as the original ‘corporate raider,’ famed for engineering hostile takeovers of companies & looting them. He had a history of corrupt dealings. He owned a Delaware factory called NVF that made Vulcan rubber. NVF had a workers compensation policy w/an AIG company, which reinsured it w/Chesapeake, a reinsurance company based in Bermuda, an offshore center.
It turned out that Chesapeake was owned by Posner. In the early 90s, a Delaware insurance investigator discovered that NVF was paying twice the market rate to AIG for the insurance. The transaction meant all the parties came out ahead: AIG would keep a portion of the inflated NVF premium before sending the rest to Chesapeake, which meant AIG would have a higher commission. Posner would write off the entire amount as a business expense & enjoy the extra cash in Bermuda, tax free. A former Delaware insurance regulator told me, ‘This was not an isolated case w/Vulcan.
AIG did that a lot.’ He said, ‘AIG helped companies set up offshore captive reinsurance companies. AIG would then overcharge on insurance & pay reinsurance premiums to the captives, giving the captive owners tax-free offshore income.’ However, the Delaware Insurance Department took no action against the insurer. When I gave AIG the details of this scam, company spokesman Andrew Silver told me, ‘We don’t have any comment on that.’ AIG declares on its website that it ‘pioneered the formation of captives almost 60 years ago,’ & it offers management facilities to run the captives in offshore Barbados, Bermuda, Cayman Islands, Gibraltar, Guernsey, Isle of Man, & Luxembourg - all places where corporate & accounting records are secret & taxes minimal or nonexistent.’’ (Idem.)
“DAVE: ‘We’re almost at the end of the interview, Lucy. Many listeners will be asking themselves what can be done about this situation. You have formed an organization to deal w/the use of ‘Offshore’ to evade taxes. Tell us about that group & how people can find out more about it.’
LUCY: ‘I’ve worked w/some associates to form The Tax Justice Network. To find out what it is & how it works, contact www.taxjustice.net....”
www.taxjustice.net... This corrupted international infrastructure allowing élites to escape tax & regulation is also widely used by criminals & terrorists. As a result, tax havens are heightening inequality & poverty, corroding democracy, distorting markets, undermining regulation & curbing economic growth, accelerating capital flight from poor countries, & promoting corruption & crime around the world.