A joint news release said that the practice to be audited, now apparently discontinued, involved booking premiums for workers’ compensation coverage as premiums for general liability policies instead. The regulators alleged that by booking the income as something other than workers’ compensation premiums, AIG avoided paying its true share into various workers’ compensations funds.
According to the announcement, an AIG document dating from the early 1990s roughly estimated an unlawful benefit to AIG at tens of millions of dollars annually.
In 1992, an internal AIG legal memorandum to top management reported that the practice was illegal. This followed similar warnings made years earlier. It remains unclear when the practice stopped, according to regulators.
AIG, has recently been cooperating with the Attorney General and Insurance Department’s inquiries, the announcement said (See AIG Executives Canned For Failing to Cooperate With Investigators ).