Informant Complicates AIG Investigation
June 13, 2005
As if the American International Group (AIG) case was not complicated enough, a deal cut with Joseph H. Umansky may further complicate cases being brought forth by the Justice Department and the Securities and Exchange Commission, The New York Times reports.
Spitzer has already cut a deal with Umansky, sacrificing the former AIG senior vice president for the bigger fish of former chief executive Maurice R. "Hank" Greenberg.
The problem comes when federal authorities go after AIG itself, along with Greenberg, and former Chief Financial Officer Howard I. Smith, since the evidence must not come from Umansky's immunized testimony.
In an unusual move, Spitzer has referred to this testimony in his own complaint.
"Once Umansky has landed the prize of outright immunity from the state, he and his lawyer will be reluctant to accept anything but that from the feds," said Robert Mintz, head of the white-collar defense practice at McCarter & English.
Furthermore, granting Umansky immunity for the sake of his testimony may not be helpful outright to the prosecution, since he was a party to the alleged crime, Mintz argued.
Innocent Parties Under the Bus'
"A witness who played a significant role in the fraud who is granted immunity is subject to the criticism that they essentially got away with the crime and did so by throwing other innocent parties under the bus," Mintz said.
Umansky was in charge of the company's reinsurance business and also headed up special projects, including complex offshore deals.
In 2000, Smith initiated a project to convert some of AIG's underwriting losses into a financial loss. Umansky was involved in the scheme, which entailed reinsuring the underwriting loss through an offshore shell, Capco, and then collapsing the shell at a financial loss.
AIG has disclosed this transaction, admitting to the "improper structure" and recategorizing the capital losses as underwriting losses. Spitzer has also charged the company and its executives with creating an offshore reinsurer, Union Excess, to absorb troubled portfolios, yet not fully disclosing the nature of the relationship to New York State insurance regulators.
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