Greenberg to pay SEC $15m, putting AIG lawsuit to rest

Greenberg, 84, and former AIG chief financial officer Howard Smith “directed several different accounting transactions to materially affect AIG’s reported financial results,’’ the Securities and Exchange Commission said in a lawsuit filed yesterday in federal court in Manhattan. Smith will pay $1.5 million to resolve the suit.

“Corporate leaders cannot avoid the truth and consequences of their companies’ performance by using improper accounting gimmicks and signing off on distorted financial reports,’’ said the SEC’s enforcement director, Robert Khuzami. The accounting deals “presented a false financial picture and allowed AIG to claim success in meeting its performance goals.’’

The insurer’s former chairman and chief executive has been locked in legal battles since AIG’s board pushed him out in 2005 during an investigation by then-New York Attorney General Eliot Spitzer of reinsurance, the business of selling insurance to insurers.

The company later restated $3.4 billion of earnings and in 2006 agreed to pay more than $1.6 billion to settle state and SEC claims it had misled investors. Greenberg has called much of the restatement unnecessary.

In a statement yesterday, Greenberg said the agency’s complaint does not blame him “for the vast majority of accounting issues’’ involved in the adjustment and does not accuse him of fraud. If it had, “he was confident that he could defeat in court any such claim.’’

“He acknowledges the obvious fact that he was CEO of AIG at the time of the accounting at issue,’’ the statement said. “He believes that this is an appropriate basis to resolve the SEC’s investigation and put these issues behind him.’’

Smith, 64, was originally inclined to fight the SEC’s claims, which involve transactions that are almost a decade old, his attorneys said. “Resolving the SEC matter allows him to move forward with his life without the added legal costs and distraction of this lawsuit,’’ they said.

The pair didn’t admit to or deny wrongdoing. Smith is barred from serving as an officer or director at a public company for three years. He was also barred for five years from working as an accountant in SEC matters.

Shares of AIG climbed as much as 34 percent to $29.39 and ended trading yesterday at $22.53, up 53 cents.

The jump may have been fueled by speculators buying back stock they borrowed and sold short, said Robert Harrington, managing director of equity trading UBS AG in Boston.

AIG is down 96 percent in the past 12 months.