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.