Spitzer Sees a Civil Resolution of AIG Probe

The new chief executive of American International Group Inc. said he was cooperating fully with regulators, who are looking into widespread accounting irregularities, and the New York attorney general said Monday that he thought a “civil resolution” of the probe was possible.

The statement from Atty. Gen. Eliot Spitzer that a resolution could be reached without criminal charges sent the huge insurance company’s shares up $2.35 to $53.30 on the New York Stock Exchange, putting more distance from their recent 52-week low of $50.16.

In a letter to shareholders released late Sunday night, Chief Executive Martin J. Sullivan said management was working “to ensure that everyone throughout the organization complies with AIG’s policy of full cooperation with all investigative efforts, both internal and external.”

Sullivan, who was named to the top post March 14 after the board forced the resignation of longtime CEO Maurice “Hank” Greenberg, also said AIG “has worked diligently to protect and preserve relevant documents” needed in the probe by the Securities and Exchange Commission and Spitzer’s office.

Sullivan made the statement about documents after acknowledging an earlier-reported incident in which documents were removed from an AIG building in Bermuda or destroyed. He said one Bermuda-based employee was terminated and several others resigned “for failure to cooperate with AIG’s review.”

He also emphasized that despite the investigations, AIG was not in any financial danger.

“It is unfortunate that current circumstances have obscured the reality that AIG’s unique global franchise is sound, our financial position is solid and cash flow remains strong,” Sullivan said in the letter.

On Monday, Spitzer said the board and current management of AIG “are now cooperating” with his continuing investigation.

“Based upon these efforts, and based upon our knowledge to date, we believe that a civil resolution with the corporation will ultimately be achievable,” Spitzer said in the statement.

Shares of New York-based AIG have fallen nearly 30% since mid-February when subpoenas by the regulators were disclosed.

On Monday, brokerages upgraded AIG shares on grounds that they had dropped too low.

Smith Barney raised its recommendation to “buy” from “neutral,” citing the company’s strong business model and what it termed the “extremely remote possibility” of criminal prosecution of the firm.

Morgan Stanley, meanwhile, raised AIG to “overweight” from “equal weight,” primarily on valuation.

Meanwhile, the Wall Street Journal reported that a private company that controls about 12% of AIG shares ousted at least seven AIG executives from its board, including Sullivan.

The Journal, citing unnamed people familiar with the matter, said the move by the owners of Starr International Co. -- who include Greenberg -- meant that Sullivan no longer had any say over a big portion of AIG’s executive compensation program.

Starr International has long been used for a deferred-pay and investment plan for AIG management.

Regulators, as part of a broad investigation into AIG’s activities, are examining whether Starr International and its cross-ownership by AIG executives pose potential conflicts of interest.