Elliot Spitzer, AIG, Hank Greenberg and whats coming next.

As many of you know, I've been following the AIG situation closely for a variety of reasons.

Today's Wall Street Journal has the most recent news, which is that Elliot Spitzer has decided to not pursue a criminal case against Hank Greenberg for his role in the alleged stock price and reinsurance manipulations that brought about his removal by the AIG board earlier this year. I don't think anyone ever thought for a minute that a criminal case was a viable option once the facts came out, but I do believe we are just seeing the tip of the iceberg on some civil and regulatory issues that will have profound consequences for the structured settlement industry.

Specifically, I have heard through various sources, brokers and others that a major area of interest to both federal and state investigators is the long standing, "approved broker and approved markets" lists that exist at AIG and most other major casualty companies. While this might seem innocuous compared to what appear to be the larger issues of rebating, short changing, etc, apparently this is a much bigger deal then we all realized at first.

If you go back to the Marsh Mac case that started much of this, it was the "steering of business and fraudulent bids" that sank the ship, and it is not a big leap to consider approved brokers and approved markets as steering of business and fraudulent bids as well. I've heard over and over that when the AG's and Fed's have been interviewing on this, the conversation always turns to those issues and I suspect the next bombshell in our business is going to be an attack on that practice.

My question is, at what point in time does this steady chipping away at the foundational business practices of the settlement industry through class action litigation on rebating, shortchanging allegations, steering of business, 468B tax battles, etc, begin to take a toll and bring about a fresh appraisal of where we are headed as a profession? This is starting to look like death by 1000 cuts, and unless there is some industry leadership to address the business practices, we will be by passed by other financial institutions and providers who can point to these issues to raise doubts about our products.

Lets face it, virtually every bank, investment company and trust provider points to our business practices to sell against us, and we keep feeding them ammunition instead of cleaning up our act and put out the strong points of what we do and what we are about. Hopefully it won't take a round of litigation and regulatory action to make us take those step.

Comments

[John Darer]

I think people should stay focused on their business. Stay up to date with continuing education (beyond what is needed to maintain insurance and/or securities license and educate and love, educate and give great service to your clients. There's plenty of business beyond the so-called "approved lists". Each side is entitled to have an approved vendor or vendor list.Like playing a team sport everyone wants to make the team, everyone wants to play at the highest level, but not everyone does. Hopefully the consumers of services that have lists keep an open mind to innovation. Let's face it note everyone in the industry has an equal level of copmpetence. There are stengths and weaknesses. Should anyone be forced to deal with everyone (the competents and the incompetents)? If the general business practice is similar to the real estate model then all sides get fair representation and there are opportunities for all.

As you know many carriers have broadened their approved annuity market lists. Some don't have one at all.

The NSSTA is doing something about business practices and resolving disputes it and we should all embrace its recent positive efforts even if some have to bite their tongues because they think its late in coming. Sometimes progress is slow,but it is happening.

[Jack]

Ouch.

Government Expected to Announce $1.6 Billion Settlement With AIG


NEW YORK (AP) -- In one of the largest regulatory settlements ever, American International Group Inc. is expected to pay $1.6 billion to settle accusations of bid-rigging and the use of deceptive accounting practices, according to people familiar with the settlement terms.