AIG SunAmerica Background Information
Founded in Texas, in 1926. American General Insurance Company (now AIG) has grown primarily through acquisitions. In 1972, the company began to focus its expansion efforts on the rapidly increasing retirement savings market. American General acquired VALIC, a group retirement savings company, in 1977 and Western National Life, an issuer of fixed annuities in the United States, in 1998.
American International Group (AIG) is now a significant competitor in insurance and financial services. Ranking amongst the top 20 companies in the world with high market capitalization. AIG’s common stock is listed on the New York Stock Exchange and stock exchanges in London, Paris, Switzerland, and Tokyo.
SunAmerica Inc. began its financial service operations in 1971 with the acquisition of Sun Life Insurance Company of America, which had been formed in 1890. In the 1980s, SunAmerica divested itself of some other insurance operations while expanding into financial advisory services, mutual funds, and retirement products, including annuities and guaranteed investment contracts.
AIG acquired SunAmerica in 1999 and American General in 2001, combining these two companies with AIG Life to form AIG SunAmerica, now the retirement savings division of AIG. The company claims it provides products and services to more than four million families across the United States.Additional Information on AIG SunAmerica AIG Pays $1.64 Billion to Avoid Fraud Prosecution
After a lengthy investigation involving misleading accounting practices, American International Group, Inc. (AIG) agreed to pay a record $1.64 billion to settle claims against it by the SEC and New York state authorities. The company took accountability for deceiving investors and regulators with misleading accounting practices and apologized.
AIG allegedly took part in bid-rigging schemes, paid secret commissions to insurance brokers to steer the business, used phony insurance deals to burnish its earnings, and misstated the workers’ compensation premiums it collected.
AIG agreed to settle allegations it helped two customer companies commit accounting fraud. Under investigation by the Securities Exchange Commission (SEC) and facing prosecution by the Fraud Section of the United States Department of Justice and the U.S. Attorney for the Southern District of Indiana, AIG agreed to settle that matter and to be enjoined from future violations of federal securities laws.
In 2003, AIG settled a case brought by the SEC and agreed to pay a $10 million civil fine to resolve allegations it fraudulently helped a company falsify its earnings report and hide losses, thus avoiding prosecution at that time.
AIG was also required to establish a transaction review committee, which answered to an independent consultant appointed by the SEC to review the policies and procedures of that committee and to determine if others used the transactions violated GAAP or obtain a specified accounting or reporting the result.SunAmerica Pays $7 Million in Church Fraud Case.
After SunAmerica’s agent was indicted for perpetrating a “Ponzi” scheme, they agreed to pay $7 million. Part of the payment was through insurance, to resolve its liability in a long-running “church-fraud” case dubbed “Operation Island Scam” by federal investigators.
The charges stem from a fraud case involving hundreds of primarily elderly church members who lost millions in a Ponzi scheme run by a SunAmerica agent and others. As a result of criminal proceedings, several individuals related to this agent were sentenced to prison.
The group’s ringleader was an affiliate of SunAmerica Securities of Phoenix, Arizona. This agent was also an evangelical Quaker who told his investors he could get them above-market interest rates on their money through real-estate investments. Instead, the funds were invested in a Ponzi scheme, in which funds invested by later investors are used to make payments to earlier investors, with earlier investors often providing testimonials of how well their investments had performed.
According to an attorney for the victims, about 200 of the investors, most elderly church members, will recoup up to 70% of what they lost. Regulators warn of such “affinity fraud” cases, in which persons brought together by language, race, religion or other factors can fall victim to others in the same group. Key members of a group are sometimes, knowing or unknowing, collaborators in affinity fraud.AIG’s FSC Securities – A ‘Cozy’ Place for Fraud?
FSC created “an extremely cozy environment for a man bent on defrauding his customers,” said three FINRA Securities Arbitrators, “management ineptness was broad,” and the firm ignored red flags that the broker had “selling away” issues (using one’s status at a firm to aid in the sale of investments not approved by the firm).
FSC Securities of Atlanta, part of the AIG Financial Group, had a warning when it hired broker Scott Hollenbeck that he had problems during his past employment. He said a panel of three arbitrators in their award to several investors. They say he even embezzled money from a church organization during his past employment.
Hollenbeck based in Kernersville, N.C. where he was employed by FSC for over five years, ending in 2002, not counting a 20-month hiatus. Not named in the arbitration claim, Hollenbeck faces charges over an alleged Ponzi investment scheme which reportedly took place after he left FSC and included the use of billboards.
Securities arbitration is a private process, without records available to the public, and the decisions made (“awards”) generally do not include much discussion about the case. However, these arbitrators saw fit to blast FSC while awarding victims almost $700,000, including legal fees and expenses.
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