Reverse Spin: AIG to shell out $10M in SEC case

And you think your cellphone bills are high?

American International Group Inc., the New York insurer, agreed Thursday to pay $10 million to settle fraud charges for its role in alleged accounting violations at Brightpoint Inc., the Plainfield, Ind., cellphone distributor.

The Securities and Exchange Commission said AIG had been accused of creating and selling an insurance product that helped Brightpoint overstate its earnings by 61%. In a statement, AIG agreed to the SEC order to settle the matter but didn’t admit or deny the agency’s findings.

“This case shows that the commission will pursue insurance companies and other financial institutions that market or sell so-called financial products that are, in reality, just vehicles to commit financial fraud,” Stephen Cutler, the director of the SEC’s enforcement division, said in a prepared statement.

Standing his ground

* With a salary like that, who can blame him for digging his heels in the ground?

Despite facing a barrage of criticism for receiving a $140 million pay package, Richard Grasso on Wednesday said there’s no way he’s going to resign as chairman and CEO of the New York Stock Exchange.

“Would I voluntarily, after having just committed four more years of my life to the institution, step down? The answer is clearly not,” Mr. Grasso told reporters after a panel discussion sponsored by the Business Roundtable, a Washington-based lobbying group for corporate chief executives.

On Tuesday, Mr. Grasso said he would give up an additional $48 million in deferred compensation. But that did little to quell criticism.

“The way we pay CEOs is completely crazy,” investor activist Nell Minow said during the panel discussion. “It’s not related to performance. It does not promote performance, and it is not a genuine negotiation.”

Of course, Mr. Grasso may not have much choice in whether he stays or goes. That’s because a group of floor traders at the exchange are reportedly putting together a petition calling for new management to replace him.

If they gather 100 signatures from 1,366 seat owners, they could hold a special meeting to talk about replacing him.

Sinking feeling

* The whole world is going to hell in a handbasket now that Jennifer Lopez and Ben Affleck, the Hollywood power couple, have postponed their wedding.

On Friday, just days after Jen and Ben broke the news, the University of Michigan’s closely watched gauge of consumer confidence fell to a preliminary 88.2 in September, from August’s final 89.3.

Economists had been expecting a preliminary median September reading of 90.

The situation went from bad to worse after the Department of Commerce reported that total retail purchases had risen only 0.6% in August, far less than the 1.4% gain economists had been expecting. Excluding autos, retail sales had risen 0.7%, mostly in line with forecasts that called for a 0.8% rise.

“Consumer spending slowed dramatically. It could be an indication that the temperature of the economy is turning cooler than what people wanted to see,” said John Person, head financial analyst with Infinity Brokerage Services in Chicago.

“Due to this report, there will be questions arising as to the health of the U.S. economy.”

Could it be that consumers were rushing out to stores to return their wedding gifts?

Like our spin? E-mail comments or suggestions to Frederick P. Gabriel Jr. at [email protected].

Closing Quote

“I don’t know what you’d legislate. Don’t steal? Don’t cheat?”

– Kathryn McGrath, lawyer with Crowell & Moring LLP, on whether the passage of new laws would keep major mutual fund firms honest in view of recent allegations that members of the fund industry collaborated to defraud shareholders. Page 31