FBI Is Taking Look at Insurers
The FBI has been looking for nearly a year into whether accounting problems and other corporate fraud schemes might present a pervasive problem for the insurance industry, bureau officials said Wednesday.
Assistant Director Chris Swecker said the FBI did not want to be unprepared if insurance-related corporate fraud became the next big crisis, as with the savings-and-loan industry in the late 1980s and corporate fraud in 2001 and 2002.
“I’m not going to say this is the next crisis,” Swecker said at a news briefing. But he said the FBI did not want “to be caught napping” on the issue of insurance-related corporate fraud.
“We’re just taking a hard look at it,” said Brian Lamkin, the FBI’s financial crimes section chief.
Swecker said the FBI was looking at accounting gimmicks and schemes that affect a company’s bottom line, including cases like the one involving American International Group Inc., to see whether there was a more pervasive problem.
AIG said Sunday that it would restate more than four years of financial reports, slashing $2.7 billion from its net worth, because of accounting errors that misled investors about its fiscal health.
The financial restatements by the New York-based insurance company follow an internal probe begun in response to investigations by New York Atty. Gen. Eliot Spitzer and the Securities and Exchange Commission into AIG’s accounting practices.
On Monday, in remarks to the Society of American Business Editors and Writers in Seattle, Spitzer criticized the Bush administration, saying it had failed to expose illegal practices in the U.S. insurance industry.
Spitzer said that even though 10 insurance industry executives had pleaded guilty to fraud charges and paid more than a billion dollars in restitution, “not a word has come out of the White House about maybe there being a structural problem in the insurance industry.”
Swecker said the FBI had been looking at the industry for the last two or three months, but Lamkin said it had been under scrutiny for close to a year.
Swecker said the FBI had not determined whether the problems were pervasive. He released a report on financial crimes that cited a “recent trend involving insurance companies caught in the web” of corporate fraud schemes.
The report said unscrupulous executives improperly used customer premiums to pay corporate expenses.
“This in turn leads to financial statement fraud because the company is required to ‘cover its tracks’ to conceal the improper utilization of customer premium funds,” the report said.
