Inner City Press: AIG Watch: American General and its Questionable Subprime Lending and Credit Insurance, Human Rights, Etc.

Inner City Press' AIG Watch

Click here to Search This Site Click here for Inner City Press front page ICP has published a (double) book about the AIG-relevant topics of predatory lending, and corporate fraud - click here for sample chapters, here for a map, here for fast ordering and delivery, and here for other ordering information. CBS MarketWatch of April 23, 2004, says the the novel has "some very funny moments," and that the non-fiction mixes "global statistics and first-person accounts." The Washington Post of March 15, 2004, calls Predatory Bender: America in the Aughts "the first novel about predatory lending;" the London Times of April 15, 2004, "A Novel Approach," said it "has a cast of colorful characters." The Pittsburgh City Paper says the 100-page afterword makes the "indispensable point that predatory lending is now being aggressively exported to the rest of the globe." Click here for that review; click here to Search This Site For or with more information, contact us.

Updated May 14, 2007

ICP / Fair Finance Watch has been concerned about AIG's insurance practices for some time. As reported in the New York Times of July 21, 2001, advocacy led to AIG discontinuing American General's abusive "single premium credit insurance" (in which customers were assessed interest on the premiums). But other predatory practices have continued. To seek action on these, ICP has for example obtained a copy of AIG's American General's Insurance Product Guide, which instructs employees on how to convince customers to accept insurance, by tying it "seamlessly" to the loan. The products are supposed to be separate, with no tying. ICP has now submitted to regulators the pertinent sections of AIG's internal Insurance Product Guide to the regulators; ICP has also for example raised that AIG still does business in Zimbabwe, despite the country being, for example, on the U.S.'s and other countries' human rights sanctions lists. For or with more information, contact us.

Update of May 14, 2007: AIG, one of the sleaziest yet under-the-radar of the subprime lenders, is this week in the news, taking a charge of $128 million for over-charging borrowers. Ever since AIG bought American General, it has been fleecing borrowers. Now even the Office of Thrift Supervision, which enabled much of it, is requiring that something be done. AIG says that "talks are at an advanced stage."

Update of April 23, 2007: A bankruptcy court judge has set an April 25 hearing to discuss contracts Entergy New Orleans has signed with both the state and an insurer to receive more than $220 million to help the company pay for storm damage it sustained from Hurricane Katrina. Under the state contract, Entergy is to receive a $171 million Community Development Block Grant. The company also has reached a $53 million settlement with Hartford Steam Boiler Inspection and Insurance, a subsidiary of AIG Inc

Yeah, AIG likes to play cheap in paying on insurance policies it has collected premiums for...

Update of January 22, 2007: From the mailbag this week, we have an intriguing message about AIG's American General unit spying on its borrowers through their credit reports, to pay to prevent payoffs:

Subject: Abuses at American General from an Insider

To: Inner City Press

From: [Name withheld]

Sent: Sat, 20 Jan 2007 12:31 PM

Are you aware that American General tracks the shopping patterns of its customers thru the credit bureau Experian?

AG submits its customer info to Experian. Experian then sends a notification to AG when a customer is shopping for loans elsewhere. AG then calls the customer. This is a violation of FCRA issues. One customer in Maryland has already filed suit.

That sure sounds like AIG...

Update of December 4, 2006: AIG's subprime lender American General Finance is expanding overseas. Last week, AIG announced a plan to purchase Ocean Finance and Mortgages Ltd., a British finance broker for home loans. American General Finance claimed this acquisition marks the first time the company has operations located outside North America. Maybe the first, technically, for American General -- but it's just that American General is now AIG's vehicle for exporting predatory lending...

Update of November 20, 2006: Two AIG units have received subpoenas from the Securities and Exchange Commission and the U.S. Justice Department, an AIG spokesman admitted on Friday. AIG Financial Products received a subpoena from the Justice Department's anti-trust division and AIG's SunAmerica was hit with a subpoena from the SEC...

Update of October 16, 2006: On AIG's role in the "block box" bond scam: " In the Florida deal, a little-known government body called the Capital Trust Agency turned the work over to its advisers: Anchor National Life Insurance, a subsidiary of AIG; CDR Financial Products, a financial advisory firm in Beverly Hills, California; and the underwriter J.P. Morgan. These companies and other middlemen extracted $12 million in fees from the bond issue; the rest of the money went unused. The AIG unit and CDR had an agreement that the agency said it did not know about. The agreement allowed CDR to increase its fees as long as the money was not spent for its intended purpose, according to a Nov. 18, 1999, letter from CDR's president, David Rubin, to AIG's Anchor National vice president, J. Franklin Grey. The less money that was used to acquire and renovate apartments, the more money CDR stood to make, and the less risk AIG's affiliate faced as an insurer since all of the money stayed in a safe account. 'Black box deals, pooled deals, blind pools - people call them lots of things,' said Sherman Golden, an Atlanta-based bond lawyer, who said that he experienced one of these deals firsthand when he was a municipal official. He said that he has seen too many deals that benefited banks and other promoters at the expense of taxpayers. AIG spokesman said AIG no longer participated in such transactions. Black box bond deals also rob the U.S. Treasury of about $100 million a year in revenue." -Bloomberg News.

Update of October 9, 2006: From the mailbag:

Subject: AIG's American General Financial

From ;[ ]
To: MLee [at] InnerCityPress.org
Sent: Fri, 6 Oct 2006 8:40 PM
My name is Dr. Randal Christensen, I reside in the state of Utah. I would like to relay an experience I am currently having with AIG's American General Financial. The Office I am referring to is located in the city of Riverdale, Utah. I have a loan through that office. I had to declare bankruptcy back in 2003 due to a accident I had which put me nearly $500,000.00 in debt with medical bills. I was not able to return to my work for over a year. Needless to say it has been a struggle to pay my bills. American General to the rescue NOT Another victim of this companies predatory lending practices. They provided a loan, "To catch-up my past due bills," as they called it however they needed collateral for the loan. Now after chapter 7 bankruptcy, losing my house, plus everything else I owned, except for a 1994 Pickup which I had the title to. I used that as collateral. pretty scary because that was my only transportation. I had no choice, so I signed the contract with the unbelievable interest rate of 32% this made the payment $372.00 per month. They again tied insurance premiums to the loan with no disclosure. Which I thought was outrageous, I had fallen one payment behind on that loan and they called and left a message they were going to repo my truck. I found a financial advisor who has help me get my bills in order and paying them off. Now the fun begins, during the 6-7 months that I was behind 1 payment. I have been told by the front desk receptionist of the Riverdale Branch office I Quote " I'm a dead beat, a liar, I don't deserve a chance, just about everything you can imagine. I have been left phone messages with the same language on them. Now I was able to get $3000.00 saved up so I went down to their office to pay on the loan. I called and made arrangements with the manager to get my truck title released. He said " for a payment of $3000.00 he would release the title. I did take the money to him on Oct. 2, 2006 and he released my title. Now today Oct 6 2006 I get a call from them saying I am a month behind on my payment. That the $3000 I paid them was just to release the title of the truck and did not count as a payment. I said no I paid you a payment on 2 Oct and the manager said no that wasn't a payment. and that it was company policy to not record it as a payment but a release of collateral. He said "it was his branch and he would run it how he wanted, so I was still a payment behind " I still owe $2700.00 on the original loan. I have reported the Manager of the Branch and the front desk receptionist to the district manager who is Bill Kishton of South Jordan Utah, he did nothing then I reported the events to Russell Barrett of Westminster Colorado the Division Manager he does no thing so now I am going on up the food chain to a Matt Mitchel of Tempe Arizona who is Western region Manager. I am sure I will get the same results. NOTHING, NADA, just more B S. Just another example of how this company does business and treats people. They need to be stopped. I think the work y'all are doing is great. You have my permission to print all or any of this.

When AIG bought American General, they said it wasn't predatory...For or with more information, contact us.

Update of October 2, 2006: AIG has applied to the Bank of Thailand for a banking license by the end of this year, after it sent the central bank the information it requested regarding allegations of accounting fraud by AIG. "Last week, we turned in the required information to the central bank. I think at this time we have submitted all [requested] information," AIG Consumer Finance Group country manager Chaiwat Utaiwan told reporters. Sure, let a fraudster into banking...

Update of May 15, 2006: At one of AIG's stealth subprime lenders, Wilmington Finance (which has so far refused to provide its 2005 HMDA data in analyzable form), the CEO has quietly left." A receptionist at the company had no information on Mr. Schiano and said that the new CEO is George Roach." (NMN). Ah, AIG, and its approach to transparency...

Update of April 10, 2006: The 2005 Home Mortgage Disclosure Act data, which Inner City Press / Fair Finance Watch received in late March from numerous lenders, were received from AIG only in non-analyzable PDF format. ICP sent the following, as yet not responded to:

From: fairfinancewatch.org

To: Robert.Rossiter@aig.com; ernest.patrikis@aig.com

Sent: Mon, 3 Apr 2006 13:34:39 -0400

Subject: Reiterating ICP's 2/27 request for all of AIG's 2005 HDMA-LAR in .dat format

Mr. Rossiter, et al. --

This concerns the formal request for all of AIG's 2005 HMDA-LARs, in the .dat format in which they are provided to regulators, which Inner City Press / Fair Finance Watch directed to the attention of yourself and others at AIG on February 27. Our request noted that last year AIG unlike nearly all of its peers refused to provide its data in the .dat format, but only unanalyzable PDF. Subsequently, you provided the data of AIG FSB in .dat format, while the American General subprime units persisted in providing only unanalyzable PDF. The request urged that AIG and its American General affiliates follow their peers, and act within the spirit of the HMDA regulation, to provide the data in a useful format.

We are troubled that you have nevertheless insisted on providing even AIG FSB's 2005 data only in .PDF format. This seems to us to be calculated to evade review by community, consumers and civil rights groups, particularly inappropriate given the large and expanding size of AIG's subprime lending business (and AIG FSB's status as an insured institution covered by CRA). We have already received numerous non-bank or -thrift affiliated subprime lenders' 2005 HMDA-LAR in .dat format. We urge you to forthwith provide the data in .dat format, as specified in our Feb. 27 formal request. Please advise immediately, thank you.

--Inner City Press / Fair Finance Watch

For or with more information, contact us.

Update of March 27, 2006: AIG's American General Finance Corp. said in a Form 8-K filed March 24 that it will restate its unaudited condensed consolidated financial statements and other financial information at and for the quarters ended March 31, June 30, and Sept. 30, 2005. AIG said that the restatement relates to the correction of errors in its accounting for four cross-currency swaps designated as hedges of its foreign currency denominated debt" -- American General's non-US subprime consumer finance? We'll see.

Update of February 20, 2006: And still they keep on buying: Dow Jones of February 17 reported from Taipei that American International Group Inc. proposes to acquire Taiwan's Central Insurance Co., �AIG plans to complete the transaction within 30 days after shareholders of Central Insurance approve the deal.� There was no mention of (the) required regulatory approval�

Update of February 13, 2006: The sickest irony of the Feb. 9 settlement, as gleefully recounted in the Feb. 10 WSJ: "American International Group's size makes the twin hits lighter than they would be for most insurers -- profit neared $11.5 billion in the year ended Sept. 30. In 4 p.m. composite trading yesterday on the New York Stock Exchange, AIG's shares were up 74 cents to $67.12... AIG is in a position to benefit because people are getting wealthier in developing markets, but also from people spending an increasing percentage of their mounting wealth on insurance, which is seen as a safe investment. Investors and analysts have long been bullish on those operations and that feeling didn't exit with Mr. Greenberg, who still has eyes on some of AIG's turf through two private-equity funds he still controls." And those who still control AIG directly are not uninvolved in the practices described below in this Report. To be continued...

Update of January 23, 2006: AIG has named to its board of director ex-Citigroup Bob Willumstad, who falsely claimed at the April 2005 Citigroup shareholders meeting that Citigroup had not made super-high-cost HOEPA loans. AIG�s press release states that �Mr. Willumstad, 60� joined CitiFinancial (then Commercial Credit, a predecessor company) in 1987.� Yep � he was in subprime consumer finance for a long time � and now still is. AIG also does subprime lending through its ex-American General units�.

Update of August 22, 2005: From the mailbag:

Subj: American General Finance Company/Predatory Lenders!

Date: 8/20/2005 5:17:44 AM Eastern Standard Time

From: [ ]

To: AIG-watch [at] innercitypress.org

How much longer will it be, before American General Finance Company is put to a stop on predatory lending? This has been my nightmare with them.

My husband and I are victims of predatory lending. American General Finance Company encouraged us to refinance our home through them. They assured us that this was the right thing for us to do, and the best thing that we could do. They promised us that our interest rate would remain about the same, about 9-10% at the most, and the payments would stay around the same, around $450-500 at the most. They did not tell us that the loan was a revolving credit loan, like a credit card, so that we’d never pay the house off. Everything happened so fast, at the closing. After signing the papers, we found out that we had singed to a 14.50% interest rate and almost $750 monthly payment. They also did not inform us that we had three days to look at the contract. This loan has caused us to almost lose our home of 25 years. They foreclosed on us and I immediately filed for bankruptcy. The original loan amount was $56,000. With all the interests, fines, fees, and costs for their lawyer fees and whatever else they charged us for, we now owe them $72,000 for our home! So even though we have filed for bankruptcy, we are still threatened by the possibility of being foreclosed on again. From month to month, it’s almost impossible for us to make our house payment, now being $750 and if we’re late almost $800. I know for a fact that they are just waiting on us to default so that they could take our home away from us! In the last three years we have paid them over $35,000, and we now owe them $72,000, there’s a serious problem with this! This is robbery!!! I personally know someone else who has experienced a similar problem with them, and they too were forced to file for bankruptcy. On the day my house went up for sale at the courthouse, there were two other families that AG foreclosed on. One day, while I was making a payment at the office, another customer was there making a mortgage payment too. They were there to make a payment so that they could get ahead on a payment. They told him that was impossible for him to do, because the computer would not allow them to do that. Well, I had the same experience with them. I made two payments in one month, thinking that I was going to be a payment ahead. The next month it was as though I had never made an extra payment, it went towards the interests. You can imagine how I felt, furious!!! Several times they tried to get me to redo the loan with them so that they could catch me up, but I refused. Instead I tried to redo the loan with other finance companies, and when I did, they made it hard for me to accomplish that. I then found out that there was a prepayment fine or penalty fee of $4,000, along with other fines and fees they were charging me, making it impossible for me to get out from underneath them. They have me trapped!!! If it continues like this, sooner or later they will have my home. And they know it too!!! And others too!!! American General Finance Company preys on minorities and the low- income people. They must be put to a STOP!!! PLEASE DO AN INVESTIAGATION ON THEM.

Okay... For or with more information, contact us.

Update of July 18, 2005: Last week AIG announced it will sell a gas pipeline to GE. It’s the Southern Star pipeline system, through Kansas, Oklahoma, Missouri, Wyoming, Nebraska, Colorado and Texas; it is being sold for $362 million, by AIG Highstar...

Update of April 18, 2005: Inner City Press / Fair Finance Watch is reviewing the 2004 Home Mortgage Disclosure Act data of AIG FSB including the new information concerning which loans are subject to a rate spread (3% higher than comparable Treasuries on a first lien, and 5% on a subordinated lien), and has found that AIG FSB in 2004 imposed higher-cost rate spread loans 2.27 times more frequently on African Americans than on whites in its home state of Delaware. AIG’s four American General subsidiaries are still refusing to provide their data in the same format as (now) AIG FSB, and virtually all other lenders. Developing...

Update of April 4, 2005: This week it’s logistic. On February 28, ICP Fair Finance Watch made a formal request for AIG’s (and American General’s) 2004 mortgage lending data; the data by regulation must be provided “by March 31 for a request received on or before March 1.” ICP’s request was directed to the signer of AIG’s previous responses to ICP’s regulatory comments. AIG waited the full month, then on March 31 provided its data on five separate compact disks, one in unanalyzable PDF format, the others in a “read-only” format that resists importing into analysis software. AIG knows this; ICP has complained to AIG (re-requesting that the data be “provided in a single .DAT file, allowing analysis of the entire conglomerate’s patterns at one time”) and, having received no further response (or data) from AIG, now to the regulators as well. Click here to view the first of ICP’s studies (including of AIG’s peer, Citigroup); AIG / American General will be in a future study, watch this space.

Update of March 15, 2005: Too little, too late? The ouster of Maurice “Hank” Greenberg, confirmed on a conference call today, does not resolve the numerous issues which swirl around AIG, which also include questionable subprime lending practices at AIG’s American General units, and standardless international business. As simply one example, which ICP's Human Rights Enforcement project / Rights Force has raised directly to AIG, it continues its business in Zimbabwe, see, e.g., www.aig.com/gateway/country/1/70/0/0/79/Zimbabwe.htm. We’ll have more on all this going forward.

Some previous reports:

Update of November 29, 2004: Beyond the $126 million SEC settlement last week, now it’s reported that Hank Greenberg is “being looked at” for inflating AIG’s stock price during the take-over of American General. Per the WSJ, the criminal inquiry is premised on Greenberg having called the office of Richard Grasso, then the before-the-fall chairman of the New York Stock Exchange, to ask him for help in propping up AIG's share price, to keep AIG from having to issue more stock to pay for American General. Though Grasso was out of the office that day, traders who worked for Goldman Sachs unit Spear, Leeds & Kellogg ultimately bought up the AIG shares... For or with more information, contact us.

Update of October 25, 2004: Call it meltdown -- or a threat to go fully offshore. On October 21, AIG's Hank Greenberg reacted to the news that this company is the subject of a grand jury probe by complaining, "We do business all over the world and the place we are having the most problems is right here in the U.S. We are the same company that we always have been." Masters of account smoothing, and since buying American General, of predatory lending too...

Update of October 18, 2004: From last week’s insurance scandal revelations, in the case where ACE increased its bid for casualty insurance for Fortune Brands by $110,000 to $1.1 million, just to satisfy Marsh. Marsh "requested we increase premium to be less competitive, so AIG does not [lose] the business," an ACE exec wrote in an e-mail. As we’ve said, predatory is not confined to AIG’s consumer finance business...

Update of October 11, 2004: AIGsaid it was under investigation for certain deals, "including three transactions" with PNC -- but failed to mention that the investigations also covered five additional deals with two other insurers. BW quotes current and former law enforcement sources say they're taking a tough stance with AIG because they believe it plays "hide the ball" by allegedly resisting requests for documents, e-mails, and other information from SEC and Justice staff. And when it's required to disclose investigations, they add, AIG downplays their seriousness in public statements. Just like its approach to AIG American General’s predatory lending...

From the NYT of Oct. 7: “Mr. Ransom of Fox-Pitt, Kelton said he arranged a conference call with other analysts who follow A.I.G. yesterday because its stock '’was getting beaten up, and I thought this was grossly overdone.' In the call, Mr. Ransom said of the dispute between the company and regulators: 'A.I.G. reacts to these things depending on whether they think they have done something wrong. And I think in the present case, they don't think they have done anything wrong.' Joe Norton, a spokesman for A.I.G. confirmed that Mr. Greenberg spoke with Mr. Ransom and said he had no reason to believe Mr. Greenberg had not been quoted accurately.”

ICP’s question: how does this comply with the SEC’s Regulation Fair Disclosure?

Update of September 27, 2004: AIG disclosed last week that it has received a Wells notice indicating that the SEC is considering a civil action against AIG and one of its subsidiaries for their dealings with PNC. AIG said in a press release that they "believe the proposed action would be unwarranted and will respond to the staff." A spokesman for AIG declined to provide further comment, and a spokesman for PNC would not comment. What transparency! AIG paid $10 million in September a year ago to settle SEC charges that the insurer helped telephone distributor Brightpoint Inc. hide losses with a fraudulent insurance policy....

Update of September 13, 2004: From the mailbag:

Subj: Question about predatory lending by American General

Date: 9/10/2004 11:23:35 PM Eastern Standard Time

From: [Name withheld in this format]

To: AIG-Watch [at] innercitypress.org

My mother has a loan from American General Financing in North Idaho and it is classic predatory lending... We also have the insurance from them with her 23% interest loan. In fact there are two and one has a $720.00 check with a poorly forged signature. She didn't even know about it until last week when I made her get copies of her loan with her signature on them. AG had only given her a few of her loan papers and none with the check or stating that she had two insurance polices from them until we demanded these copies. An attorney has agreed to look at her loan next week but AG has told her they are going to take her home and her vehicle (used on the loan) by the end of the month. Any advise or help you can offer will be a huge blessing. We are a little lost in all of this. Thank you for your site [etc.]

Keep us posted! For or with more information, contact us.

Update of August 23, 2004: From the mailbag:

Subj: American General Finance Insurance Problem

Date: 8/15/2004 10:54:15 PM Eastern Standard Time

From: [NAME WITHHELD IN THIS FORMAT]

To: AIG-Watch [at] innercitypress.org

Hello! I have had loans with American General Finance since 1998. My car had been the collateral. I was in severe financial straits due to a failing business, and I accepted three offers to refinance my loan (each adding at least $300 in fees alone to the amount of the loan, practice I understand is called "loan flipping"). I admit to lacking financial sophistication. However, before accepting the third and final refinancing I expressed concern that the amount of the loan might then exceed the value of the car, hence if I were in an accident and totaled my car the insurance would not cover it. I was assured at that time that the insurance would indeed cover the amount of the loan. I accepted this statement based on trust. In February 2003 my car was indeed totaled, and at that time my coverage was the insurance supplied by American General. It in fact did not cover the loan; in fact, the insurance only covered approximately $3200, leaving a balance of approximately $5800. Since I needed a car for my work, I had no choice but to buy a replacement car, and it became difficult to carry both payments. Now, I am being sued by American General for the balance of the loan at $5500... The contract I signed allows for damages not exceeding $5000, including attorneys fees and all costs, but they are suing me for $5500...

Raise it -- document it and raise it. And keep us posted. For or with more information, contact us.

Update of August 16, 2004: From the Financial Times of August 12, "Maurice Greenberg at insurer AIG, for example, joked that he had two jobs: working through the governance issues during the day and running the company at night." Yep -- off the books...

Update of July 26, 2004: Specifically on AIG’s export of subprime consumer finance, The Nation (Thailand) of July 19 reported that "AIG Finance (Thailand) is a consumer finance company majority-owned by AIG Consumer Finance, a subsidiary of American International Group Inc. The company concentrates on providing hire purchases, personal loans and promissory note services." Hey, that’s American General Finance’s business in the U.S...

Nothin’ but business: last week Hank Greenberg gave a rosy picture of AIG’s global profits and prospects -- including its exploitation of World Trade Organization rules -- and its political focus at home: "In Japan the improving economy has contributed to our growth, especially in the growing commercial lines business and personal accident operations. The UK, European and Australasian regions had excellent results. Latin America has had another good quarter, too. In China our landmark venture with PICC Property & Casualty to develop the market for accident and health products is up and running. Also, we expect by the end of 2004 to extend our general insurance operations to more cities in China as the market opens up in compliance with World Trade Organization rules." Greenberg-the-patriot also said: "Reforming the US tort system is more than an insurance industry issue. It is critical to the economy and the country. Necessary class-action reforms had significant support in Congress, and it is unfortunate that debate over the number of non-germane amendments attached to the bill led to what we hope is a temporary setback. Efforts are under way to reconcile these differences and the bill could be reintroduced at a later date. We will continue to work for its passage." Work and pay, that is. AIG’s political contribution usually pan out though, even to the extent of AIG being granted special rights during China’s entry into the WTO...

Greenberg also noted that a recent proposal in India's Parliament to allow foreign insurance companies to increase their ownership to 49% from 26%, which, if passed, would "present a significant opportunity for us to enhance our presence in this attractive market, where our life and general insurance joint ventures have had rapid growth throughout the country." For or with more information, contact us.

Update of July 19, 2004: AIG and power plants, from a (dense) July 13 press release: "AIG Global Investment Group (AIGGIG) announced today that Northern Star Generation, LLC (Northern Star) has acquired four power plants from El Paso Merchant Energy (EPME), a unit of El Paso Corp., for approximately $226.4 million and the assumption of approximately $39 million in consolidated non-recourse debt. Northern Star is owned equally by AIG Highstar Generation LLC... AIG Highstar Generation LLC is owned by AIG Highstar Capital II, L.P. (Highstar II) and other co-investors. Highstar II is a private equity fund sponsored by AIGGIG. AIG Financial Products Corp. (AIG-FP) provided the acquisition financing and worked closely with Northern Star in evaluating the projects and negotiating the acquisition terms. Additionally, in its role as exclusive restructuring agent, AIG-FP will use its expertise to restructure certain assets in an effort to optimize the return of the portfolio. The four power plants, located in Massachusetts, Pennsylvania, Florida and Nevada, are the first to be acquired of up to 25 power plants that Northern Star agreed to purchase from EPME for up to $746 million." AIG's environmental standards will, one would think, be closer scrutinized as time goes by.

Update of July 12, 2004: American International Group, Inc. (AIG) will report its second quarter 2004 earnings on Thursday, July 22, 2004. On that date, AIG Chairman Hank ("Just Hank") Greenberg will host a conference call, broadcast over the Internet, at 9:00 a.m. EDT....

Update of June 7, 2004: From a first-hand account of AIG's annual meeting, generously provided by an attendee: the business meeting was over in less than half an hour, followed by speeches by Hank Greenberg and six others, on significant growth opportunities in things like terror insurance, insuring companies doing business in Iraq, workplace violence insurance and SARS coverage. They trumpeted opportunities for class action reform, mourned the crumbling of a proposed asbestos settlement. American General's new markets to low income borrowers were heralded as a growth area. But without anti-predatory lending safeguards: the shareholders' resolution on the topic was opposed by management and roundly voted down. The Titanic lurches on, with no rudder but greed...

Update of June 1, 2004: From the prime minister of (troubled) Georgia, Zurab Zhvania: "I would simply remind journalists about the visit to Georgia by top US businessmen about a month ago. It was a group of about 12 very rich businessmen, super-millionaires, as they are sometimes referred to. I could name Mr (Maurice) Greenberg, president (chairman) of the world's number one insurance group, AIG. Since his visit to Tbilisi, I have met him in New York. He confirmed his desire to open a branch of his insurance group in Georgia. He is seriously interested in Georgia." Hey, Hank Greenberg and AIG are in Zimbabwe, too...

Update of May 24, 2004: AIG, the company that clung to an insider-heavy board of directors, and tried most recently to get a shareholders' resolution about its predatory lending knocked off the proxy (apparently using the argument that predatory lending is a part of AIG's "ordinary business") - anyway, now AIG's mausoleum king, Hammered Hank Greenberg, is speechifying against corporate transparency. Of the bipartisan Sarbanes-Oxley bill, Greenberg complained last week that "Some of us have two jobs - the regulatory burden during the day and running the company at night." He also promised (or threatened) that "We're on the hunt," Greenberg said at the company's annual shareholder meeting. "There will be continued consolidation in our industry, both domestic and foreign. We will not overlook that opportunity." Those deals must be done at midnight, since the entire day is spent complying with Sarbanes-Oxley...

Update of May 17, 2004: in the run-up to this week's AIG annual shareholders' meeting, at which a proposal is in the proxy statement that would require AIG's board of directors to "conduct a special executive compensation review to study ways of linking executive compensation to successfully addressing predatory lending practices." AIG tried to get the proposal kept out of the proxy, contesting it at the SEC (where AIG lost); now, AIG has urged a "no" vote, stating that "AIG’s subsidiaries, through their legal and compliance departments, have developed internal procedures and lending policies to ensure compliance with applicable laws both in the United States and abroad." ICP note: the "abroad" part is particularly laughable -- AIG lags even its peers inside the U.S., and has no safeguards beyond the U.S...

Update of May 3, 2004: in the run-up to AIG's annual meeting, reports resurfaced last week that AIG "insured Boston's Big Dig, a multibillion-dollar tunnel and highway that cut a path across the city. In the process, AIG pocketed $150 million in federal funds. When Sen. John McCain [R-Ariz.], chairman of the Senate Commerce, Science and Transportation Committee, moved for action against AIG, Kerry pleaded to protect the insurer and got McCain to call off punitive legislation. After which, our hero's Citizen Soldier Political Action Committee received $30,000 from AIG for his Senate campaign, and AIG executives contributed another $18,000 directly to Kerry's Senate and presidential campaigns. " Pay to play -- by a still-predatory lender...

Update of April 26, 2004: Last week, ICP attended and raised predatory lending issues at Citigroup's annual shareholders' meeting (click here to view ICP's report). Similar question are on the agenda for AIG's annual meeting, including in the form of a shareholders' resolution that would link, at least loosely, addressing (and stopping!) American General Finance's predatory lending with executive compensation. Hank Greenberg raked in $29.7 million. According to Business Week, " Though Greenberg doesn't participate in AIG's supplementary bonus program, the board gave him a $ 6.5 million bonus anyway." There are many definitions of predatory... We will have more on this. For a CBS MarketWatch article on these (predatory lending) issues, click here.

Update of April 19, 2004: the buzzword corporate governance is an afterthought at AIG. SEC filings earlier this month show that AIG in the past two years has given the IRS $3.5 million more than they would otherwise have received because it had not put Hammered Hank Greenberg's bonus plan to a vote of the shareholders. Tax regulations provide that a company's pay to its chief executive over the first Dollars 1m is not tax-deductible unless it meets certain performance-related criteria and is pre-approved by shareholders. Since 2001, Hank's been off-road: the $5 million bonus Greenberg grabbed in 2002 and 2003's $6.5 million were not tax-deductible. AIG declined to comment on why it had not put a new plan up for shareholder approval until this year...

Update of April 12, 2004: AIG is a predatory lender that flies below the radar. A recent example is the lack of reporting on AIG's American General's robbing of consumers in New Jersey. All too rare, the NJ Department of Banking and Insurance took action, and ahs ordered at least $1.2 million in restitution by AIG to more than 700 NJ consumers. The Department of Banking and Insurance explicitly found that the homeowners had been overcharged on their home equity loans from AIG's American General -- they were charged points significantly in excess of the amount indicated on their pre-disclosure forms. Such bait-and-switch is called predatory lending, and its among the things (along with obfuscating advertisements) that AIG knows...

Update of March 29, 2004: Among AIG's predatory lending storefronts is an office of American General Finance in a strip mall in New York's Broome County, at 1901-1905 Vestal Parkway East... Meanwhile, AIG EVP Jay Wintrob will shoot the breeze at UBS on March 29 at 6:00 p.m. - it'll be here -- event.streamx.us/event/default.asp?event=UBS20040330

Update of March 22, 2004: The second string, unplugged: AIG vice chair Martin J. Sullivan and CFO Howard I. Smith will be talkin' trash at the Banc of America Securities' "Financial Services: Unscripted" Conference on Tuesday, March 23, 2004 at 8 a.m., www.veracast.com/webcasts/bas/financial-services-2004/ id09101178.cfm

Update of March 15, 2004: AIG and tax avoidance (a/k/a tax evasion), from the intrepid Rob Wells of DJNS: "Senate Finance Chairman Charles Grassley, R-Iowa, and the panel's top Democrat, Sen. Max Baucus, D-Mont., alerted leaders on the Senate Budget and Appropriations committees about the potential financial damage of leasing tax shelters.... Grassley and Baucus released a list of investors, lawyers, lenders and appraisers involved in the leasing transactions with transit systems, a virtual "Who's Who" in the corporate financing community. The list names investors such as First Union Commercial Corp., a unit of Wachovia Corp. (WB), and lenders such as AIG Financial Products Corp. (AIG). . An AIG spokesman had no immediate comment." Yeah, right...

Update of March 8, 2004: old AIG -- and we mean, old -- has scheduled its annual shareholders' meeting for May 19, 2004. Along with questions about AIG's predatory "growing global consumer finance business," last week AIG bragged that its "Private Client Group" will "provide policyholders employing domestic staff with access to background investigations" - by Kroll, no less. According to AIG's press release, "Policyholders have the ability to screen all of their U.S.-based employees, such as their nanny, housekeeper, driver, gardener, chef, or home health worker" -- including checking for "complete employment history and professional licensure." Yep - those forged gardening licenses are a real problem...

Update of March 1, 2004: AIG and privatization: last week AIG announced it will invest close to $10 million in Hungarian shipping firm Volan Tefu Rt, whose chairman says "That presents us with great growth opportunities...we're looking mostly at privatization deals in the Ukraine, Poland, the Czech Republic, Slovakia and Slovenia." AIG will have two seats on the board...

Update of February 23, 2004: Hammered Hank the subprime lender will speak at the Merrill Lynch Insurance Investor Conference on Monday, February 23, 2004 at 9:05 a.m. ; AIG "note[s] that Mr. Greenberg's remarks may contain forward-looking statements." We'll see...

Update of February 16, 2004: AIG begrudgingly committed to drop single premium insurance in connection with the subprime lending business it was acquiring, in the face of Inner City Press / Fair Finance Watch's protests, from American General in 2001. The commitment, made in letters to regulators, was reported in the New York Times (July 21, 2001), and in the American Banker of July 23, 2001: "AmGen to End Single-Premium Insurance.. to counter criticism from Inner City Press."

Now, Inner City Press has obtained a letter, from AIG's "Merit Life Insurance Company" of Evansville, Indiana (also the headquarters of American General Finance) stating, "Enclosed is your new single premium accidental death and dismemberment insurance policy." The letter is cc-ed to Judith A. Henley, 8079 Kingston Pike, Knoxville, Tennessee. Ms. Henley works at a branch of AIG's American General Finance; ICP has also obtained Ms.Henley's (and other American General Finance employees') "Merit Life Commission Statement." [Ms. Henley is Employee Number 2086663; her AGF branch colleagues are Chris S. Outland, Steven F. Kopman, and Martha B. Watkins.] These commission statements reflect that, for AIG, American General Finance storefronts are a selling place for single premium insurance -- in a sense, that loans are an excuse for selling high-cost insurance. For shame...

Update of February 9, 2004: Following-up, from the mail bag:

Subj: American General Finance

Date: 2/2/04 9:16:45 PM Eastern Standard Time

From: [Name withheld upon request]

To: AIG-Watch [at] innercitypress.org

1. In response to the former employee email you received, she can probably forget about the employee handbook. They are well guarded.

2. While working for AGF, I was given a "Needs Improvement" on my review because my INSURANCE SALES did not measure up to what was expected of me. I was

actually told by a VP that I would be an excellent witness for AGF in the Insurance suit going on because my figured proved I didn't believe in the products.

3. When former customers requested copies of documents, we were told to inform them there was a charge for copies, and that was only IF we still had their file. A lot of times, we were told to tell them files were kept off site.

4. As far as leaving AGF, it was quit or be committed. I have never worked for a company that so consistently told you that you were terrible at your job.

Keep that mail coming! Meanwhile, in the litigation seeking to overturn Toledo, Ohio's anti-predatory lending ordinance, an executive of American General, which has three Toledo offices, said that the firm will stop making mortgage loans in Toledo if the law is upheld. "American General -- will face potential criminal liability for having, in good faith, interpreted in a manner different than Toledo's officials certain vague terms in the Toledo ordinance such as 'unconscionable' and 'materially detrimental,'" said Michael McClellan, senior operations director at AIG....

Update of February 2, 2004: From the mailbag:

Subj: aig/american general /ins/predatory lending

Date: 1/29/04 9:10:34 PM Eastern Standard Time

To: AIG-Watch [at] innercitypress.org

i was informed of your site about a week ago, while looking for an employee handbook from american general finance. i am amazed at the extensive research you have done on predatory lending and my former company american general finance. for your information :

american general loves to harass employees into selling credit insurance products, my district manager sent out an email ridiculing me for my non productive insurance sales, this was 30 min after being served with papers for the class action law suit that has taken over this state(ms). as far as predatory lending, too much weight is given in the local branches, most managers do not have the knowledge to make the kind of loans they make which leaves agf wide open for mistakes. they are a powerful company and once they have decided they don't need you any more, you better get ready. i am in the process of filing suit

Keep us posted!

Update of January 26, 2004: Hank and hawala: AIG announced last week that it will offer policies of $10,000 of accidental death and dismemberment coverage to U.S.-based remittance customers of the National Bank of Pakistan. The press spin recites that more than 700,000 Pakistani nationals live and work in the United States. Together, they control about $250 billion of assets; individuals remit $300 to $500 per month abroad. Those who remit funds for distribution overseas through the National Bank of Pakistan will automatically get the insurance at no additional cost; the bank is to pay the premiums. Coverage is to be given for 12 months from the first remittance, and only one transaction is required to become eligible. The coverage is available to anyone using the bank's branches in New York or Washington. Hank (Greenberg) and hawala...

Update of January 20, 2004: AIG, buyer of power plants. On January 16, El Paso Corp. announced an agreement to sell its interests in the Front Range Power Plant near Fountain and 24 other U.S. plants for $ 920 million to units of AIG. Front Range is the second-largest plant in the deal after a plant in Florida. Most of the other 23 plants are located in California, Florida and Pennsylvania. Most of the plants, including Front Range, burn natural gas to generate electricity.... AIG Global's Northern Star Generation LLC will acquire the power plants for its private equity funds, affiliated companies and third-party clients. AIG Financial Products Corp. will fund the acquisition.

Update of January 12, 2004: AIG the predator on the move: now it plans to launch a credit card in China. The Financial Times (Jan. 8) says this "highlights AIG's desire to diversify away from its core insurance operations into higher-margin personal finance businesses." Yep -- predatory lending in the U.S. and abroad...

Update of January 5, 2004: according to Best, ten different units of AIG, the world's largest insurer, held Parmalat notes with a total book value of $122.1 million, prior to the company receiving bankruptcy protection from the Italian government Dec. 28. Great due diligence...

Update of December 29, 2003: the AIG African Infrastructure Fund just acquired a 36.4% stake in Moroccan fertilizer importer Gharaf Corporation. From Moroccan fertilizer to predatory lending (though American General), AIG does it all...

Update of December 22, 2003: Last week AIG put out a press release about appointing a manager for its relationship with PICC Property and Casualty Co Ltd. Hammered Hank is quoted that he "is well suited to help consumers throughout China benefit from AIG's vast experience and skill as the world leader in A&H and related products. These products will be marketed through PICC's unrivaled distribution network, which serves approximately 70 pct of the country's general insurance market with over 128,000 agents and sales representatives throughout China." AIG - and its predatory lender American General -- running wild throughout China: now there's a thought...

Update of December 15, 2003: AIG's chairman, we'll call him Hammered Hank Greenberg, was in the U.K. last week, holding forth. He denounced asbestos claimants, and said that the insurance industry "is viewed like the man in the circus who has a pail and shovel behind the elephant, trying to clean up the mess... That's what we're expected to do many times, whether we should be responsible or not." Well. If Hammered Hank is holding the shovel and bucket, where have all his lobbyists gotten to?

Update of December 8, 2003: news last week that Don Kanak's been named co-chief operating officer and vice chairman of AIG clouds again the succession picture - just what Hank Greenberg, the eternal one, wants. Many presumed that Kanak's fellow co-COO Martin Sullivan, was standing first in line. "That remains our belief, though this latest move does add more uncertainty to that potential outcome," equity analysts with Morgan Stanley opined last week...

Update of December 1, 2003: from the federal district count in Philadelphia comes the decision In re Mintze, reciting that Ethel M. Mintze, 58, a North Philadelphia homemaker, challenged a $44,700 mortgage issue by American General Consumer Discount Co. in her bankruptcy petition. When Mintze was looking to finance a $3,800 heater installation in 2000, she was referred to American General, according to the opinion. Mintze alleged that the financing company required she borrow $44,700 as a condition of financing the heating project - a loan that would refinance her current mortgage and consolidate her credit card debt at a 13.44 percent annual percentage rate, the opinion said. But there was an arbitration provision of the contract, and when Mintze filed to undo the loan under the federal Truth In Lending Act, alleging predatory lending, American General asked to remove the case from bankruptcy court and moved to compel arbitration, U.S. District Judge Mary A. McLaughlin wrote. The bankruptcy court refused to dismiss the case and did not enforce the arbitration provision... More on this soon. For now out point is: AIG's American General remains a predatory lender...

Update of November 24, 2003: The American Banker of Nov. 18 recited that Hank Greenberg "in recent years... , has said it had no desire to buy a bank. 'We market through banks all the time without buying a bank,' he said last year at a Banc of America Securities conference." Nope -- they didn't need a bank (they own a savings bank) -- only a predatory lending finance company...

Update of November 17, 2003: AIG continues putting moves on China. On Nov. 14, SinoCast reported that Tang Yunxiang, president of PICC Property and Casualty Company Limited, said that the company signed the strategic investment agreement with AIG to strengthen the cooperation and develop the insurance products. Tang said that the company aimed to establish an international insurance company in 10-15 years... Greenberg, chairman and CEO of AIG, said that China's insurance market was of great potential. The two companies will develop jointly the products of the accident insurance and the short-term health insurance." Why not AIG's other specialty -- predatory lending? On that, state-by-state action is addressed in this new ICP map -- click here to view and use.

Update of November 10, 2003: AIG, one of the ultimately opaque, power mad and secretive companies, paradoxically runs television ads, at least in the United States, make it seem like a house of mirth. "AIG -- we know money," a woman's voice says. There's one mirroring a football game, "Go AIG!" The image from the ad has nothing to do with the company's culture, or M.O....

Update of November 3, 2003: Hank Greenberg's strong-arming of Dick Grasso is still reverberating, with the SEC now digging into the issue. Hank in his arrogance is proud -- "anything for the share price," is what he says -- and he means anything...

Update of October 27, 2003: AIG's earnings announcement on Oct. 23 stated, in an endless quote from Hank Greenberg, that "[b]Both U.S. and foreign consumer finance business had a very good quarter. Operating income is up 20.5 percent to $173.6 million. American General Finance, Inc. (AGF) had an outstanding quarter. The quality of the loan portfolio is good and demand is strong. AGF is opening new branches. This business is achieving an excellent return on equity. Our international consumer finance business also is achieving good results. Performance was substantially better in Hong Kong, in line with the up-tick in Hong Kong's economy... AIG has a large number of promising growth initiatives underway around the world. In addition to the purchase of GE's Japan life and U.S. personal auto insurance businesses, AIG has entered into cooperative agreements in Russia to identify investment opportunities, improve homeowners insurance and provide financing alternatives for Russian home buyers. We also entered into a cooperative agreement with the People's Insurance Company of China (PICC) that will enable AIG to market its accident and health products through the PICC's 4,300 branch offices. We will provide training to PICC's agents and expect to sell an extended portfolio of products that we do not currently distribute through our life branches or property-casualty operations in China." Home lending in Russia? If it's like AIG's American General in the U.S., it's... predatory lending in Russia. We'll see.

Update of October 20, 2003: As we've been musing about the recent revelations about Hank Greenberg's arms-twisting of Grasso, and AIG's facilitation of PNC's accounting fraud, we'd forgotten an interesting overview of AIG in The Economist of March 2, 2002, reporting among other things that AIG's " board is stuffed with the great and good who have represented America abroad: Barber Conable, former congressman and president of the World Bank, Carla Hills, a former trade representative, and Richard Holbrooke, recently United Nations ambassador." Why have not of these people been called to account for AIG's Enron-like role with PNC, for example? Or for AIG's American General's ongoing predatory practices? Hmm...

Update of October 13, 2003: Hank Greenberg's piece in Friday's FT attempted to put a public policy mask on Greenberg's strong-arming of Dick Grasso, which the WSJ uncovered. AIG seeks to dominate behind the scenes, and only comes public when it gets flushed out. So -- flush 'em out... Another question we've begun asking: how is it that AIG has received so much less scrutiny for its facilitation-of-accounting-fraud (for example, with PNC) than even Citigroup and Chase? This is among the issues ICP / Fair Finance Watch has raised this week to the Federal Reserve and OCC, on PNC's applications to acquire United National Bancorp. But, separately, it is an AIG question...

Update of October 6, 2003: From the mail bag, inside AIG:

Subj: AIG

Date: 10/2/03 2:42:10 PM Eastern Daylight Time

From: [ ]

To: AIGwatch [at] innercitypress.org

Perhaps you should look into the fact that AIG Claim Services, Inc. P&C Division has laid off hundreds of employees in an attempt to "streamline" its operations or so it says thanks to Stevel Iller and Chuck Shader. The remaining operations are being staffed by a bunch of trainees because they cannot find qualified candidates or so they say. Most likely its just another cost cutting measure. If you can hire a trainee for $25k a year, it certainly less than hiring a qualified person for $45-50k. Obviously at this point they have no concern about their "customers" who have paid thousands of dollars for their premiums. The bottom line is how much AIG can put in its pockets is all that counts. They have done virtually nothing to assist soon to be unemployed personnel. Their Human Resource Dept. is ineffective and has provided no concrete information regarding some key issues on this layoff. They are clearly attempting to screw as many people as possible. And no one in the media has ever reported on the fact that one Jericho NY employee committed suicide after receiving the layoff news. Notice AIG kept that one hush hush. Nor did AIG offer any counseling to its employees after this tragic suicide. It is believed that other AIG claims divisions will soon have the same fate and fall to the axe. Some day the mighty giant will topple.......I say keep your eyes on AIG I am sure more will come to light after the recent current events.

Kinda speaks for itself. Here's also hoping that the WSJ's Oct. 3 story about AIG's Hank Greenberg pressing Grasso to make specialist SLK buy more of AIG's stock is acted on, by John Reed (right...), Donaldson and the SEC, or even the NYS AG. AIG is among the most abusive of corporations, from community issues and predatory insurance to the stock markets and beyond. And they generally frighten-off inquiries before they even begin. It's time for that to end...

Update of September 29, 2003: ICP raised the issue of AIG's settlement of fraud charges with the SEC; here's the Pennsylvania Insurance Department's (PID's) response:

"The Department thanks you for bringing the post-acquisition AIG settlement with the SEC to its attention. However, at this time, the Department does not believe that the information in your letter provides sufficient basis to re-open its consideration of the AIG/GE acquisition, particularly since the settlement with the SEC in no way admits any liability on the part of AIG. Of course, any such decision would require exercise of the Department's judgment and discretion. As made clear by Department Counsel Caboot's August 25, 2003, correspondence, the Department would be pleased to provide Inner City Press... with access to any and all applications filed by AIG in the future."

Yeah -- AIG settled fraud charges just for the heck of it.

Update of September 15, 2003: ah, AIG. We've just put in the following, to state insurance regulators:

...this concerns American International Group, Inc. ("AIG"), its recent (September 12) guilty plea to fraud charges, and the Department's recent processing of AIG's applications to acquire control of the above-captioned GE companies (the "GE PA Insurers"). ICP submitted timely opposition to those applications. On August 25, the Department faxed ICP a copy of a response by AIG (AIG explicitly refused to itself provide ICP with a copy of its purported response, stating among other things that it was too busy). ICP immediately prepared a reply, which it faxed to the Department on August 26. ICP was then informed that the Commissioner had approved AIG's applications on August 26 -- one day after providing ICP with a copy of AIG's purported response, and before considering ICP's immediately reply to AIG's response. The Commissioner's order asserts that AIG meets all the standards set forth in Pennsylvania's version of NAIC's Model Insurance Holding Company Systems Act (the "Statute").

Well, on September 12 it was announced that AIG had pled guilty to rare fraud charges brought by the SEC. How is THAT consistent with the Statute? Perhaps what AIG meant, in its response's reference to being busy, was that it was busy engaging in, or negotiating a guilty plea to charges of, fraud. Question: did AIG inform the Department of its late-stage plea negotiations with the SEC? If not, particularly given that AIG's application was timely opposed, might that failure to disclose itself be fraudulent or otherwise problematic? And if so, the Commissioner's August 26 approval order is misleading, and ill-serves consumers...

For or with more information, contact us.

Update of September 8, 2003: a search of recent federal campaign contributions for "Maurice Greenberg" reveals seven contributions: Missourians for Kit Bond (2), Chris Dodd, Carper for Senate, Bush-Cheney, Judd Gregg and Mark Foley. A search for AIG general counsel Ernest Patrikis reveals five contributions: Missourians for Kit Bond, Chris Dodd, Carper for Senate, Republican National Committee and "Team Sununu"...

Update of September 1, 2003: Let's talk about a regulatory process that's far less than meaningful, and about why AIG and its American General subsidiary face insufficient scrutiny. On August 18, within the comment period of the Pennsylvania Insurance Department on the AIG-GE insurance deal, ICP submitted detailed comments about AIG's insurance sales practices. On August 25, the Pennsylvania Insurance Department faxed ICP a "response" by AIG, to which ICP on August 26 replied thus:

ICP's contention, which is also documented by the Insurance Product Guide which ICP submitted into the record, is that the employees of AIG American General are being trained to hard-sell credit insurance, to convince individuals who say they don't want and/or can't afford the product to nevertheless accept it. To that we can add that employees of AIG American General are told, under the heading "Why Sell Insurance?" that "[e]ach AGF branch benefits from the sale of insurance through increased profitability. Typically, forty percent (40%) of net written premiums are reflected on the PLR." ICP contends that this high percentage, and the way that AIG compensates and "incents" AIG American General employees, is virtually a "worst practice," and harms consumers... AIG's second response states vaguely that "in certain circumstances, American General Finance ('AGF') does foreclose on personal property collateral after customer default." But an obvious question is: does AIG American General only offer (that is, hard-sell) personal property insurance on property regarding which it would and does file a UCC-1, and would foreclose? The Department should ask the question, and AIG should answer.

AIG's final point is entirely evasive. ICP directed the Department to a recent news account of the administration placing Zimbabwe on a sanctions / blacklist based on human rights concerns. ICP then asserted -- and AIG does not deny -- that AIG continues to do business in Zimbabwe. Our question is not only "how is that legal and/or moral," but also how it is consistent (or not) with the integrity and other factors which the Department must consider under the Insurance Holding Company Systems statute.

AIG's August 21 letter states that its "General Counsel has previously offered to meet with [ICP] to discuss [its] concerns with AIG's business -- which offer has remained open since 2001 -- yet [ICP] has refused to take AIG up on this offer."

AIG's reference is apparently to a telephone conversation on August 8, 2001, returning a call from AIG's general counsel. Immediately after the brief conversation, AIG's general counsel wrote to the New York Banking Department, urging that Department to approve American General-related applications which ICP had opposed, including based on the telephone call. ICP inferred that the only purpose of AIG's general counsel's call was to immediately characterize it to regulators as somehow militating for approval of AIG's acquisition proposal.

Then the Pennsylvania Insurance Department said that on August 26 -- a week after the expiration of the comment period, and one day after it faxed ICP a copy of AIG's "response," the Department approved the transaction. The Order includes:

17 During the Comment Period, the Department received one comment from an interested person who opposed approval of the application on the basis of alleged improprieties by AIG.

18. AIG responded to the comment.

19. The Department fully considered the comment and AIG's' [sic] response.

On August 29 AIG announced that it was "consummated." And yet -- the issues will be pursued..

[ICP/FFW Comment to Japan; similar clearly-timely comment filed with PA Insurance Dep't]

August 17-18, 2003

Dear Commissioners and others:

On behalf of the U.S.-based non-profit Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a formal comment on the pending applications of the American International Group, Inc. ("AIG") to acquire GE's insurance business in Japan. Additionally, as set forth below, this Comment addressed not only AIG's predatory insurance practices, but also GE's predatory lending practices, which should be considered in connection with GE's applications to acquire GE Co. Ltd. from Promise Co. Ltd. See below. ICP is requesting that the agencies receiving this Comment (collectively referred to as the "FSA") conduct an inquiry into the issues raised in this timely comment, hold a public hearing, and, on the current record, deny the applications.

First, this comment should be considered timely. AIG announced this GE-Japan proposal simultaneously with a proposal to acquire control, in the U.S., of GE Property & Casualty Insurance Company, GE Casualty Insurance Company, GE Auto & Home Assurance Company and GE Indemnity Insurance Company (the "GE PA Insurers"). The Pennsylvania Insurance Department has a comment period on the proposal that runs at least through August 18, 2003. This comment is timely.

ICP is concerned that AIG, the applicant here, harms consumers including through its misleading sales of less-than-beneficial credit insurance and other forms of insurance. In 2001, AIG acquired American General, a conglomerate involved in insurance and, through American General Finance ("AGF"), in subprime consumer finance and credit insurance in connection therewith. ICP raised certain issues; AIG made a single commitment (regarding single premium credit insurance, see N.Y. Times of July 21, 2001, at Page C3, and see attached); but under AIG's ownership, American General has continued harming consumers -- including beyond the United States, on information and belief in Japan. See, e.g., AIG's April 24, 2003, press release announcing its first quarter earnings, and referring to its "growing" non-U.S. consumer finance business. While, after a previous round of advocacy, AIG announced it would drop single premium credit insurance - the scope of this commitment is not clear -- it does not seem to apply to this "growing" non-U.S. business. We ask the FSA to inquire into this, and for AIG to explain this. In terms of the misleading and abusive AIG / American General sales tactics described further below in this Comment and in the exhibits hereto, note that of GE Edison Life Insurance Co. six thousand employees, fully five thousand are engaged in sales.

First, however, for the record, ICP contends that this acquisition would be anticompetitive, now and in the future. Combining AIG Star Life (which in 2001 acquired Chiyoda Mutual Life Insurance Company) and American Life Insurance Co. (Alico) with GE Edison Life, AIG would "be at or near the top" of the market, according to Best's Review of August 1, 2003 (which also reports that this proposal would foreseeably lead to other, related acquisition moves by AIG -- which must be considered in this proceeding). [FN: Also to be considered in any legitimate competitive analysis is the consolidating structure of the industry: for example, the delayed but still proposed combination of Asahi Mutual Life Insurance Co. with Tokio Marine & Fire Insurance Co. Ltd. and Nichido Fire & Marine Insurance Co. Ltd.]

On the consumer protection / predatory lending and insurance issues, attached hereto as an example are pages from an American General Insurance Product Guide. Under the heading "Understanding Insurance Sales," the Guide begins,

"AGF has a full menu of products... Insurance shouldn't be an afterthought - it should be included as a seamless process with the loan... The benefits of both the loan and insurance should mold into one product...".

First, note that this tying of credit insurance to a loan (subprime loans are what AGF offers) is one of the anti-consumer practices most complained of. The next page shows that AIG's American General offers these "Payment Protection Products" in over 40 states -- including Pennsylvania -- and in Puerto Rico and the Virgin Islands. The same is true of "Collateral Protection Products" and "Financial Security Products," and of the "Non-Insurance Product... Home & Auto."

Next are pages describing these products. "Credit Personal Property Insurance," it is stated, "protects the customer and the lender by paying to replace or repair insured collateral used to secure an account;" it is "financed through AGF" and is "included in the amount financed."

ICP has found that personal property insurance, which is offered not only by AIG's American General but also by other subprime lenders such as CitiFinancial, is often an abusive product. An individual is search of a loan applied to AIG's AGF, and is asked to provide a list of personal property. Then, as described in this AGF Guide itself, insurance is presented as "a seamless process with the loan... The benefits of both the loan and insurance should mold into one product." But your should ask AIG: does its AGF file liens / UCC documents (or Japanese equivalent) for the personal property on which it is selling insurance? That is, does AGF has a serious intention to foreclose on such personal property -- or is the property list only sought in order to sell insurance? ICP has inquired closely into this with regard to CitiFinancial, including asking at Citigroup's annual meeting, which led to this in the Wall Street Journal:

When it makes a personal loan, CitiFinancial often asks the holders of personal loans to provide collateral. In some cases, according to CitiFinancial documents filed by Inner City Press, that collateral includes fishing lures and tackle boxes, record albums, tents, sleeping bags and lanterns -- items that CitiFinancial would almost certainly never bother to collect in the event of a borrower's default. Yet insurance is sold on the collateral in case it is damaged or lost.
"It's predatory: This insurance product has no rationale, because it's not credible that someone would want to have their loan paid with their leaf-blower," said Matthew Lee, executive director of the Fair Finance Watch project at Inner City Press. "Citigroup has not lived up to the subprime lending reforms it announced after acquiring Associates."
Citigroup officials concede seizing such collateral would be more hassle than it's worth. But they say providing such collateral on loans has a purpose -- "to make the borrower more responsible for paying the loan back," says Ajay Banga, Citigroup's business head of consumer lending. (Paul Beckett, "Efforts by Citigroup to Reform Subprime Unit Raise Questions," Wall Street Journal, July 19, 2002).

After inquiry, Citigroup's CitiFinancial acknowledged that while it asked its customers "what kind of stuff do you have?" in order to list the items as collateral and sell insurance on them, it has no intention of foreclosing on the collateral. ICP has been informed that the property lists are similarly compiled at AIG's American General, something into which the FSA should inquire and act on in this proceeding.

Within this AIG's AGF's Guide is a presentation of "The Four Step Selling Process" for credit insurance. It is a roadmap in how to deceive the customer and cram insurance into the transaction -- seamlessly. It schools the employee in asking "probing questions... open and closed," and in asking leading questions, such as "Do you agree?" It emphasizes: "When the customers agree with your recommendation that our product satisfies their need, it is time to stop selling and close the sale." Emphasis in original.

There is a five-page presentation on "Managing Customer Objections." It instructs that "in reality, when objections start, the selling begins." It suggests quoting the cost of coverage in terms of "BLANK cents a day" -- a misleading way of presenting the cost of credit insurance.

The FSA should know, for example, that the U.S. Federal Reserve has asked both Citigroup and Wells Fargo detailed questions about their credit insurance practices (lists of the Federal Reserve's questions are available on request). Both Citigroup and Wells Fargo are bank / financial holding companies; AIG is not, and has not applied to the U.S. Federal Reserve for this GE proposal. This should not meant that similar insurance-related questions are not asked of AIG. The attached, timely submitted in opposition to and in requesting a hearing on these AIG - GE applications, is more than enough to trigger inquiries by the FSA. On the current record, we contend that AIG's applications could not legitimately be approved.

Additionally, as an adverse managerial factor that the FSA must, we contend, consider, it is significant that AIG blithely continues its business in Zimbabwe, despite the widely-reported violations of human rights in that country. Zimbabwe, in fact, is on the U.S. (and other countries') human rights black-lists (see, e.g., Agence France Presse of July 19, 2003 , as well as being panned in detail by Amnesty International, see, e.g. the (London) Daily Telegram of August 16, 2003). As evidence that, despite this, AIG standlardlessly continued and continues doing business there, see AIG's web site, at www.aigcorporate.com (reflecting AIG Zimbabwe at Westgate House East, Harare, Tel. 263-4-332-530); and see, e.g., Salon.com of October 30, 1998, reporting on proposed

amendment to the Senate foreign operations appropriations bill in 1996 that would have dramatically reduced U.S. aid for Zimbabwe, over a dispute between the Zimbabwe government and an AIG subsidiary. Both the State Department and the Agency for International Development (AID) opposed D'Amato's move. The tale is described in confidential AIG documents.
In the spring of 1996, AIG executives were concerned that its subsidiary in Zimbabwe, Unity Insurance Co., would be forced to sell a majority of its stake to local owners if it wanted to continue to do business there. AIG, which is one of the top 100 political party contributors in the United States, turned to its influential friends in Washington to press the Zimbabwean government to drop its plan

AIG also exerts political pressure we contend is inappropriate in, for recent example, Malaysia:

AIG is attempting to rebuff the Malaysian government's demands that it should locally incorporate its two Malaysian operations, insurance industry officials have confirmed. The giant US insurer, which controls 15% of Malaysia's life and general insurance market, recently asked Malaysia's finance ministry for a further extension to an exemption last granted in 1998... AIG is the only foreign insurer that has not complied with a 1989 Malaysian law requiring foreign-owned banks and insurance concerns to incorporate locally... Ironically, the potential spat comes at a time when AIG is undertaking a significant restructuring of all its operations in Southeast Asia. It is part of wider moves to restructure reporting lines for all its business in Asia. In broad terms, the group has decided to bring all its China-related business in mainland China as well as Hong Kong and Taiwan under one umbrella. (Insurance Day of August 18, 2003).

For all of these reasons, ICP hereby timely opposes and requests a hearing on AIG's GE applications. As noted above, in connection with GE's proposal to acquire GC Co. Ltd from Promise Co. Ltd, consider GE's lack of human rights, social and environmental standards. ICP has found troubling evidence raising a presumption of impermissible discrimination at GE Capital: ICP has searched the FFIEC.gov database of 2001 HMDA data, and finds therein that, in the Washington DC MSA in 2001, GE Capital Mortgage (NJ), for mortgage refinance loans, reported a 40% denial rate for applications from African Americans, and a 100% approval rate for white applicants. Below in this Comment, ICP cites applicable human rights laws that require your agency to consider GE Capital's disparate lending, including in Japan. ICP has also become aware that GE Capital has been targeting at consumers, offering credit lines at up to 22.99%. The product is called GE FlexPLUS; it has been described by GE as a "pilot program." See, e.g., "GE Plans to Move Into a Risky Area: World of Unsecured Personal Loans," by Kathryn Kranhold, Wall Street Journal, May 9, 2003, Pg. A3: "GE is targeting consumers whose credit history is known partly because they have taken out installment loans through GE's retail partners... GE declined to reveal which retailers would be involved [but] has been challenged by the Inner City Press/Fair Finance Watch, a New York consumer activist group. The group's executive director... contends that GE should undergo more scrutiny as it moves into a broader array of consumer-lending products. "

Several GE activities raise issues under the managerial resources and other factors that your agency must consider. As simply one example, see, e.g., Oil Daily of January 25, 1999, reporting on human rights abuses at the partially GE-owned Dabhol power plant in India -- the plant "'employs security forces who routinely beat and harass people demonstrating peacefully against the power plant'... General Electric Corp. (GE), Bechtel Corp. and the Maharashtra State Electricity Board are the other interest owners in the project, located south of Bombay on India's west coast... more than 30 police attacks against protesters," etc.. There are ongoing questions regarding GE's environmental standards, in New York and elsewhere -- including Japan.

In support of this request for a hearing and for other appropriate actions by the FSA, the above should be more than enough. While it should not be needed, consider that the Universal Declaration of Human Rights prohibits, in its Article 2, discrimination (or "distinction") by race, color, sex, language, political or other opinion, national or social origin, property, birth or other status; Article 7 requires "equal protection of the law." [Remainder of human rights argument omitted]. On the current record, AIG's and GE's applications to the FSA should not be approved.

If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew R. Lee, Esq.
Executive Director

NOTE: This page will be updated, when we receive the information we've requested from the agencies, and AIG's and GE's response(s). For or with more information, contact us.

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