Inner City Press' AIG - American General Watch
Note: Since American General's integration by AIG, this page has been superceded -- Click here for ICP's new, ongoing AIG Watch
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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.
Last updated April 4, 2005
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 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
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...
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: AIG said 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
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.
* * *
Sample earlier reports:
Update of May 19, 2003: AIG is still, according to its web site, doing business in Zimbabwe. In fact, AIG is offering "political risk" insurance there. We don't call AIG "the company without standards" -- subprime lending or human rights standards -- for nothing...
Update of September 23, 2002: Last week, First Tennessee announced the sale of $207 million in loans in its First Horizon Money Center subprime consumer loan business to American General Finance for $7 million. As part of the deal American General takes over the leases on most of the division's 30 offices. Of the very few press accounts, even fewer mentioned that American General is owned by AIG. We'll add: AIG's American General is still notorious for refusing to accept pay-offs on its subprime mortgage loans, and keeping its liens in place as a way to "retain" customers... This has been raised to AIG, without satisfaction; the issue will rise again, stay tuned. For or with more information, contact us.
Update of February 25, 2002: The Office of Thrift Supervision formal meeting on AIG was held on February 20, from 2 to 4:15 p.m.. AIG brought seven representatives, three of whom spoke: chairman of consumer finance Joel Epstein, AIG FSB president Pierce, and "outside CRA counsel" Warren Traiger. The meeting began with the OTS' presiding officer denying AIG's request that exhibits ICP had submitted be "stricken from the record.," and denying ICP's request that a second formal meeting be held.
ICP went first, and summarized its objections. For AIG, Joel Epstein began. Among other things, he stated that the OTS had met with AIG FSB's board of directors in August 2001, after the OTS had approved AIG's acquisition of American General conditioned on AIG preparing a new CRA and business plan. Next, Mr. Pierce stated that American General's Utah branch has already been closed, and that AIG is moving forward to sell American General's two California branches. Mr. Pierce states that "the Bank does not offer subprime lending products." Mr. Pierce emphasized that the $600 million in assets that AIG FSB acquired along with SunAmerica in 2001 are "volatile," and must be invested in short-term securities; this will be particularly important, he said, "if there's another terrorist attack." AIG's outside CRA counsel recited his resume -- he testified in Washington about the "new" CRA, for example -- then attempted to tear into ICP. Among the words he used were "shameless," "flaunt," "egregious" and "credit allocation." He cited as precedents that CRA programs of Raymond James' thrift, and El Dorado. ICP responded that AIG's plan -- to limit its CRA responsibilities to a single MSA while lending to its own employees nationwide, and while refusing to address questions raised about the ex-American General (now AIG) subprime lending -- would create a negative CRA precedent. ICP notes that AIG has refused to provide documentation about its employee-base, lending to which will be AIG FSB's focus. ICP urged that the application be decided by the OTS in Washington, that a new and more credible CRA plan be required, and that the OTS act on the information that ICP entered into the record.
At the conclusion of the formal meeting, the OTS presiding officer stated that while all of ICP's exhibits will be included in the OTS' internal administrative record, certain exhibits will not be made available to the public. These involve evidence that an insurance company now owned by AIG wrote policies on slaves. AIG was particularly adamant that this issue is "irrelevant," and that ICP's raising of it is egregious and shameless.
USA Today of February 21, 2002, reported in a front-page article that "Last August, insurance giant AIG, founded 54 years after the Civil War, bought another insurer, American General. With the purchase came U.S. Life Insurance, which American General had acquired in 1997. In going through U.S. Life's archives last fall, AIG discovered that the unit had insured slaves in its early years."
The reality is that the issue was raised in American General earlier than that, but American General never responded. When ICP raised it, in proceedings before state insurance regulators in August 2001, AIG responded that it was irrelevant, and attacked ICP for raising it. Most recently AIG has asked that documentation of the issue be "stricken" from the record, and the OTS has agreed to keep the exhibits confidential. Whether that makes any sense, particularly following USA Today's February 21, 2002 public report, is open to question.
The above summary is prepared without benefit to the transcript of the formal meeting, which should become available next week. Here's ICP's letter to the OTS, responding to AIG's post-Formal Meeting submission:
Dear Mr. Albanese, Mr. Rosenberg, Mr. Steffy, et al.:
On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, "ICP"), this letter and the attachments hereto are for inclusion in the record on the above-captioned matter.
With all of the provisos set forth in our previously timely correspondence, we appreciated the Office of Thrift Supervision's ("OTS's") February 20, 2002, Formal Meeting. We have submitted a FOIA and fee waiver request for a copy of the transcript, and will submit an errata sheet, if necessary, after receipt of the transcript. We note AIG's February 22, 2002, Letter regarding the offering of subprime consumer finance loans through the web page promoting AIG FSB (www.aigdirect.com/aigbank/aigbank_index.cfm). AIG argues that its post-Formal Meeting letter should be made part of the record, since "[t]he Bank was not prepared to discuss the web page exhibit at the Formal Meeting because ICP failed to provide a copy of the exhibit in advance of the meeting." But an entity, particularly a thrift holding company, should be presumed to be aware of the offerings on its own web pages, in this case, the offering of subprime consumer loan products upon which ICP extensively commented.
AIG now states that "[a]t our specific request, to further distinguish between the products offered by the Bank and its affiliates, aigdirect.com users will now receive a prompt informing them when they leave the Bank section of the aigdirect.com site." This does not change ICP's argument, that the subprime consumer lending of AIG FSB's affiliate, still offered as a click-through on the site promoting AIG FSB, is relevant and must be addressed in this proceeding. We have noted that in the WaMu - Dime proceeding, no argument was made that the lending of WaMu's subprime lending affiliates was not relevant, and that in the OTS' Lehman Brothers - Delaware Savings Bank proceeding, the OTS requested and obtained a commitment from Lehman Brothers dealing with its thrift's affiliates' dealings with other, non-affiliated subprime lenders. AIG's tortured legal arguments reflect badly on its compliance culture. We also note that AIG has not even purported to respond to the sample loan documents ICP submitted, nor to the "dragnet clause" issue raised before the Formal Meeting, and further discussed thereat.
AIG states that it "recently filed notice that it intends to develop a transactional website through [sic] the Bank currently expects to allow customers to, among other things, submit loan applications, pay bills and view check images." Given the issues that have arisen, ICP asks for a copy of AIG's notice, and for the opportunity to comment thereon.
While still not having the transcript, ICP notes that AIG's three speakers did not even purport to address the serious issues, timely raised by ICP, currently surrounding AIG as thrift holding company. The AIG speakers were dismissive of these issues. However, Bloomberg News of February 20, 2002, 4:19 p.m., reported that
The Securities and Exchange Commission has widened its investigation of PNC Financial Services Group's accounting, sending subpoenas to the company's auditor, Ernst & Young, and a company partner, American International Group Inc.... PNC has been reducing the bad loans on its books by selling them to investors over the past year. It joined with AIG last year to set up three companies designed to buy its loans and sell them over time. Ernst & Young provided assistance on the formation of the companies. "My understanding is that the SEC is looking at AIG's role in bringing this concept to PNC, PNC's revision of published earnings, and the nature of the off-balance-sheet subsidiaries to which the loans were transferred," said Ernst & Young spokesman Larry Parnell. New York-based Ernst & Young received $2.9 million for auditing PNC's books and $16.2 million for consulting and other services in 2000, according to a filing with the SEC. The firm also acted as an accounting adviser to AIG as the financial services company drew up plans for PNC's subsidiary companies.... New York-based AIG also received an SEC subpoena, said AIG spokesman Joe Norton, who declined further comment. --Emphasis added.
ICP maintains that a acknowledged SEC investigation into the thrift holding company is relevant to the thrift's "business plan."
AIG was even more dismissive of another issue raised by ICP, seeking thereon the "striking" of ICP's exhibits. For the record, USA Today of February 21, 2002, reported in a front-page article that "Last August, insurance giant AIG, founded 54 years after the Civil War, bought another insurer, American General. With the purchase came U.S. Life Insurance, which American General had acquired in 1997. In going through U.S. Life's archives last fall, AIG discovered that the unit had insured slaves in its early years." Emphasis added; article attached for inclusion in the record. The exhibits that ICP timely submitted put the above-emphasized in a different context: the issue had been previously raised to American General's headquarters in Texas. If AIG did not discover it in due diligence (which took place prior to August 2001 -- by then, the OTS had already approved the transaction, after waiving its formal meeting rules -- it is a relevant issue on AIG's managerial resources (statutory factor). ICP raised the issue in August 2001, which resulted in much vituperation and threats from AIG. Now AIG states that it itself discovered the issue in August 2001. Which is it?
AIG's CRA plan -- to limit its CRA responsibilities to a single MSA while lending to its own employees nationwide, and while refusing to address questions raised about the ex-American General (now AIG) subprime lending -- would create a negative CRA precedent. ICP notes that AIG has refused to provide documentation about its employee-base, lending to which will be AIG FSB's real estate lending focus. ICP urged that the application be decided by the OTS in Washington, that a new and more credible CRA plan be required, and that the OTS act on the information that ICP entered into the record.
Among other things at the Formal Meeting, the chairman of AIG Consumer Finance Group stated that the OTS met with AIG FSB's board of directors in August 2001, after the OTS had approved AIG's acquisition of American General conditioned on AIG preparing a new CRA and business plan. Records regarding that meeting would have been responsive to ICP's first FOIA request in this matter, and should be provided now. Next, Mr. Pierce stated that American General's Utah branch has already been closed, and that AIG is moving forward to sell American General's two California branches. ICP urges the OTS to direct AIG to cease and desist from any further closing or selling of branches while this contested proceeding continues. AIG's outside CRA counsel described ICP alternately as "shameless" and "egregious," and stated that ICP has an exaggerated sense of its own importance. This last apparently referred to ICP placing more weight on OTS precedents from proceedings in which ICP participated (e.g., Travelers Bank & Trust and Lehman Brothers FSB) than on proceedings in which neither ICP nor apparently any other community organization participated (e.g., El Dorado and Raymond James). But the agencies' implementation of CRA makes clear that proceedings in which a community organization has raised a substantive comment are given closer scrutiny. For example, the FRB delegates decision-making on most applications unless a substantive comment is received (or the proposal exceeds HHI safe harbors). In a current OTS proceeding, NetBank had requested and apparently obtained "Expedited Processing" until a substantive comment was received by the OTS. For these reasons, ICP disputes AIG's outside CRA counsel's characterizations, and notes his refusal to address the Travelers Bank & Trust (nationwide LMI lending commitment) and Lehman FSB (anti-predatory lending commitment) precedents timely cited by ICP.
AIG makes much of the fact that the SunAmerica assets were not subject to CRA prior to AIG's acquisition of them. But they ARE subject to CRA now, whether they are called a separate division of the thrift or not. For an institution's assets to increase by 3000%, and its CRA plan to increase by, at most, 100%, is laughable, as ICP initially put it, and as the director of the Delaware Community Reinvestment Action Council (DCRAC) stated at the Formal Meeting.
ICP maintains that AIG's plan -- material portions of which are still being impermissibly withheld from ICP -- is inconsistent with CRA, and is, on the current record, inconsistent with the fair lending laws. The other regulatory issues timely raised by ICP further militate for the rejection of AIG's proposed plan(s), and for other appropriate regulatory (enforcement) actions.
On the current record, AIG's plans must be rejected, reformulated, and resubmitted. A new comment period, and a Formal Meeting, on a credible CRA plan that is timely made available, are required.
For or with more information, contact us.
Update of February 18, 2002: On February 6, the OTS stated that the Formal Meeting on AIG's post-American General business and CRA plan would be held on February 20, and directed ICP and AIG to provide exhibits, etc., by February 15. But AIG and the OTS were still withholding the most basic information about AIG's business plan. So ICP on February 15 wrote to the OTS:
Dear Mr. Rosenberg, et al.:
On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, "ICP"), this responds to Regional Director Albanese's February 6, 2002, Letter regarding the above captioned matter, which stated that the formal meeting that ICP timely requested will be held on February 20, and that certain information should be provided by February 15.
As ICP has raised to the OTS in writing and by telephone, ICP is concerned that a single formal meeting held while AIG and the OTS continue to withhold most substantive information from AIG's January 18 clarification of its plans will be less than useful, will prejudice ICP's rights to contest AIG's plans, and will not comply with the spirit or letter of the OTS' 2001 AIG - American General approval.
On November 23, 2001, ICP requested documents regarding, and submitted an initial comment on, AIG's Applications to modify its business plan and establish an agency office. This followed AIG's applications in mid-2001 to acquire American General, which the OTS approved on the condition that AIG modify its business plan, and not oppose requests for a formal meeting on the revised business plan. The OTS asked AIG for supplemental information, and directed AIG to send ICP all portions not exempt from FOIA.
AIG sent ICP a copy of its January 18, 2002, Letter that is substantially, and ICP contends absurdly, redacted. Simply as examples, on page 2 of the Letter AIG states that "the Bank's marketing focus is [REDACTED]... [M]arketing the Bank's products to [REDACTED] will be a focus of the Bank in 2002." Over 80% of page 3 of the AIG Letter is redacted. On page 4, the Letter states that "Given the Bank's nationwide lending strategy, [remainder of paragraph REDACTED]. The entirety of page 5 is redacted. All but three lines of page 6 is redacted. On page 6, the Letter states "[a]s part of its strategy to meet the credit needs of individuals throughout its market, the Bank [REDACTED]. On page 7, AIG redacts its thrift's "assets... at 12/31/00." There redactions are not consistent with FOIA, nor with the OTS' commitment, in the AIG - American General Order, to allow public comment on AIG's revised business plan.
On January 28, 2002, ICP contested these redactions in a letter to the OTS in Washington, cc-ed to the OTS Northeast Region. ICP's fax to the Northeast Region stated that it was imperative that the OTS rule on the redactions, and provide the improperly redacted information to ICP, prior to the formal meeting.
On February 6, Regional Director Albanese set the formal meeting for February 20. ICP contacted OTS staff raising concerns about this timing, and inquiring again regarding AIG's almost entirely redacted January 18 submission. ICP understands that OTS staff relayed these concerns to OTS FOIA staff, and ICP was told that it would be contacted in this regard.
As of this writing late on February 14, ICP has not received any of the improperly redacted information. ICP is being asked to acquiesce to the one and only (and required) formal meeting on this Application being held while ICP does not have basic information about AIG's plan. ICP has contested the withholding of information, including CRA-relevant information, from the Business Plan. But the condition in which ICP has been provided with AIG's January 18 letter borders on the absurd. The Letter is attached hereto.
It is important for the OTS to contrast these redactions to another CRA-relevant submission made by AIG's counsel, Goodwin Proctor, to the Federal Reserve Board ("FRB") on behalf of another client, Royal Bank of Scotland / Citizens Bank. FOIA is a federal law that applies equally to the OTS as to the FRB. In the FRB proceeding, AIG's counsel saw fit, at the FRB's demand, to unredact information regarding how Citizens originates subprime loans, and what percentage of its loans are subprime. This is the type of information that Goodwin Proctor is now redacting, presumably at AIG's demand. But the law is the law; there is no basis for the OTS to be enforcing and applying FOIA so differently than the FRB. And if the OTS releases the mis-redacted portions of AIG's January 18 submission (and of the Business Plan) after the formal meeting, ICP rights will have been prejudiced.
Upon receiving Regional Director Albanese's February 6 letter, ICP nearly immediately contacted OTS staff with precisely this concern. ICP has awaited an answer, but none has arrived. In this posture, ICP does not believe that the one and only formal meeting on this application should be held on February 20. The information about AIG's plan should be released beforehand.
...Similarly, incorporated herein by reference are the full records in the 2001 AIG - American General proceeding, including American General loan documents showing loans at interest rates over 30%, and in this proceeding. We have also been provided with information regarding American General's (now AIG's) use of a so-called "dragnet clause" in subprime consumer finance loans, whereby customers are forced to "agree" that, once they take a home-secured loan from AG/AIG, all subsequent loans can be rolled into the mortgage. ICP has been informed, for example, of an American General / AIG office in Tennessee which resisted issuing a pay-off letter on an AG/AIG mortgage unless the borrower's seemingly unsecured (also subprime) consumer finance loans were paid off as well. ICP is endeavoring to obtain the underlying documents, and reserves its right to introduce such documents into evidence in this proceeding. [FN: Under the applicable statutory factors, issues that have arisen, post-Enron, regarding AIG's transactions with PNC, for example, should also be considered and discussed. See, e.g., Bergen Record of January 31, 2002: "PNC on Tuesday said the Fed forced it to reduce 2001 earnings by $155 million because transactions involving the partnerships -- in which a swaps unit of AIG, AIG Financial Products, participated -- weren't accounted for properly... 'Of course we're not happy with the level of disclosure,' said Michael Lewis, an analyst at UBS Warburg... 'AIG is like an English muffin: with a lot of nooks and crannies. It's not a transparent company.' Investors, analysts, and regulators are scrutinizing many firms balance sheets, fearing that some may be hiding debt or using questionable accounting"]. On this (and in light of AIG's seemingly rejected attempt to limit the scope of the proceeding and of the formal meeting), we remind the OTS that at the above-referenced November 15, 2001 Formal Meeting (on Washington Mutual - Dime), the discussion centered about the subprime lending of Washington Mutual's thrift's affiliates' subprime lending -- documents to that effect, including the transcript of that OTS Formal Meeting, are incorporated herein by reference, as precedent.
ICP wanted and requested a formal meeting on AIG's application to acquire American General and its problematic (from ICP's point of view) subprime lending. The OTS "waived" its formal meeting regulations and issued the above-recited conditional approval. ICP wants and has requested a meaningful formal meeting on AIG's modified Business and CRA Plans. But it is not meaningful, while AIG is being allowed to withhold from ICP basic information about the Plan(s). ICP has demonstrated that AIG's counsel has applied an entirely different standard of redacting, in another recent proceeding before another Federal financial regulatory agency. ICP intuits that AIG wishes for the formal meeting to be held as quickly as possible, while the information is still being withheld from ICP. This should not be countenanced; ICP will not acquiesce to this; the OTS should take the actions requested above (to release of the improperly withheld portions of AIG's January 18 CRA-related letter, and of AIG's business plan), and should then (re-) schedule the required formal meeting.
At 5 p.m. on February 15, the OTS faxed ICP a letter asking it to confirm its participation on February 20, and stating that if ICP did not so confirm by 3 p.m. on February 19, the Formal Meeting (which the OTS committed to its in AIG - American General approval order, after "waiving" its formal meeting rules) would be "cancelled" and not re-scheduled. ICP was preparing its response. But after close of business on February 15, the OTS/DC faxed ICP a less redacted version of AIG's January 18 letter. This reveals that AIG's focus in 2002 will be marketing and lending to its own employees. Here is ICP's February 18-19 letter to the OTS:
Dear Mr. Barnes, Mr. Rosenberg, et al.:
On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, "ICP"), this responds to Regional Deputy Director Barnes' February 15, 2002, 5:00 p.m. Letter regarding the above captioned matter, which stated that "[a]mong other things [ICP's February 15] letter requests the OTS to reschedule the Formal Meeting...". The OTS' February 15 Letter makes no mention of the basis of ICP's request: that the Business and CRA Plan on which the meeting is purportedly being held has been significantly modified, but the details of the modification have been withheld from ICP. The Letter implies that ICP waited until February 15 to raise its concerns, but that is not correct.
ICP quickly contested the redactions to AIG's January 18, 2002, Letter (we note that the "revised business plan" referred to on page 2 of that letter has been withheld from ICP in its entirety). Prior to Regional Director Albanese's February 6 letter, ICP stated clearly to the OTS that this information should be released, or at a minimum ICP's FOIA request / appeal ruled on, prior to the formal meeting. Unlike other OTS proceedings, including the West Region's WaMu-Dime proceeding in late 2001, ICP was never asked for a list of days on which it could appears at the Formal Meeting. A month has gone by since AIG's absurd redaction of its January 18 letter, and still ICP had not received a single additional piece of information about the revised business plan as of close of business on February 15. The OTS' February 15 letter states that if ICP does not today confirm that it will appear on February 20, the Formal Meeting will be cancelled.
It is clear to ICP that the OTS it treating AIG and AIG FSB differently that it treats other thrifts and thrift holding companies. In mid-2001, the OTS unprecedentedly "waived" its Formal Meeting rules while simultaneously approving AIG's applications to acquire American General, regarding which ICP has raised substantial questions regarding allegedly predatory lending. In waiving its Formal Meeting rules as to AIG, the OTS stated that public comment would be allowed, and a request for a Formal Meeting would be granted, on AIG's revised Business and CRA Plan.
Beyond the unprecedented 2001 "waiver" of Formal Meeting rules, the OTS has applied a different standard of information availability as to AIG FSB's revised Business and CRA Plan. Also, as noted above, when the OTS West Region set up a Formal Meeting on WaMu-Dime, it asked ICP what timing would work; that was not done here, either. When these issues are squarely raised to the OTS -- as ICP did in contesting the redactions to AIG's January 18 letter, in questioning the timing set forth in Regional Director Albanese's February 6 letter, first by phone, then in writing, there has been no meaningful response nor explanation. The February 15 response is, in essence, if ICP does not agree to acquiesce to the single Formal Meeting being held on February 20, the Meeting will be cancelled and not rescheduled. No response was provided in the OTS' February 15 Letter regarding the appropriateness of AIG's extensive redactions from and withholding from its January 18 letter.
After close of business on February 15 -- after 7 p.m., in fact -- the OTS/DC faxed to ICP's office a less redacted version of AIG's January 18 Letter. While ICP continues to disagree with several of the redactions, we are glad to have certain additional information, now unredacted. The information that AIG and the OTS withheld until one business day prior to the one and only Formal Meeting reveals inter alia that "employee-marketing programs will be the primary focus of our real estate lending activities in 2002" (Letter at 2-3). That is to say, AIG's thrift proposes to focus on lending to its own employees. This was not disclosed during the AIG - American General proceeding, nor in the initial Business Plan as provided to ICP. This is a major change, and requires a new comment period, and, we contend, a re-scheduled or additional Formal Meeting.
We have also noted certain differences between the January 18 letter as provided to us by AIG, and as provided after close of business on February 15. The differences go beyond the redactions: lines of text begin and end at different points on the page. See, e.g, page 1, para. 1: the version provided by AIG was longer. The same is true of the first paragraph responding to OTS Question 1, on page 2. We are concerned that by the differences between the two letters, and ask that this be addressed....
For or with more information, contact us.
Update of February 11, 2002: The hearing on ICP's comments regarding AIG's / American General's practices has been set for February 20 by the Office of Thrift Supervision. But AIG is still seeking to withhold basic information about even its CRA plans... Developing...
Update of January 28, 2002: An update on AIG, its savings bank and the subprime lending business it acquired along with American General in 2001 is required at this time. On November 23, 2001, ICP commented on, and requested documents regarding, AIG's Applications to modify its business plan and establish an agency office. This followed AIG's applications in mid-2001 to acquire American General, which the OTS approved on the condition that AIG modify its business plan, and not oppose requests for a formal meeting on the revised business plan. (See below in this Report). The OTS has indicated to ICP that its request for a formal meeting will be granted (as it must be, under the OTS's AIG - American General Order). The OTS has asked AIG for supplemental information, and directed AIG to send ICP all portions not exempt from FOIA.
AIG has sent ICP a copy of its January 22, 2002, Letter that is substantially, and ICP contends absurdly, redacted. Simply as examples, on page 2 of the Letter AIG states that "the Bank's marketing focus is [REDACTED]... [M]arketing the Bank's products to [REDACTED] will be a focus of the Bank in 2002." Over 80% of page 3 of the AIG Letter is redacted. On page 4, the Letter states that "Given the Bank's nationwide lending strategy, [remainder of paragraph REDACTED]. The entirety of page 5 is redacted. All but three lines of page 6 is redacted. On page 6, the Letter states "[a]s part of its strategy to meet the credit needs of individuals throughout its market, the Bank [REDACTED]. On page 7, AIG redacts its thrift's "assets... at 12/31/00." These redactions are not consistent with FOIA, nor with the OTS' commitment, in the AIG - American General Order, to allow public comment on AIG's revised business plan.
AIG, after providing this absurdly redacted Letter to ICP, has submitted an equally absurd "Proposed Agenda" for the formal meeting, purporting to limit issues in a way not done at any previous OTS formal meeting ICP has attended, for example the OTS's WaMu - Dime formal meeting on November 15, 2001. In any event, the formal meeting should not and cannot legitimately be held until the erroneously redacted portions of AIG's January 22, 2002, Letter are provided to ICP. ICP will then comment, including on AIG's "Proposed Agenda." And this will be updated.
Update of December 24, 2001: On December 21, AIG's Hank Greenberg appeared on public television's "Charlie Rose Show," primarily to promote his proposal that the federal government step in to help AIG and other large insurers -- but mostly AIG. Greenberg stated that AIG is in 140 countries -- "we open markets," he said -- and, as to when he will retired, stated that "the board [of directors] determines succession." AIG has over $500 billion in assets.
Meanwhile, AIG has submitted a Community Reinvestment Act plan to the Office of Thrift Supervision. Under this plan, AIG is projecting a mere $30 million in community reinvestment over the next three years. As explained in more detailed below on this page, AIG in 2001 bought SunAmerica's and American General's savings banks. American General has previously made a CRA commitment much larger than $30 million. But AIG now proposes to close American General's Utah branch, and to sell its California branches. American General's CRA commitment... simply disappears.
ICP commented against AIG's CRA plan; on December 21, AIG's outside counsel at Goodwin Procter LLP submitted a response, which it cc-ed to AIG's general counsel, and to yet another lawyer AIG's has brought on board, presumably for CRA expertise. This expertise appears to consist of listing inapplicable precedents concerning other stealth savings banks, such as that of Raymond James Bank, FSB, El Dorado Savings Bank, "Merrill Lynch Bank USA, and Travelers Bank & Trust, FSB (owned by Citigroup). AIG notes that it "serves LMI individuals outside its CRA assessment area." The example given is that AIG Bank's "private label credit cards, a prime lending product, are distributed through a network of furniture, appliance, electronics, and home improvement merchants."
AIG then opposes providing ICP with any more information, claiming that ICP wants to "rummage through [the] bank's internal documents while conducting an inquisition on all of the bank's business practices."
AIG goes on to argue that the OTS should not and cannot, either at the formal meeting or apparently in any other way, consider the subprime lending that AIG acquired along with American General. Just to cover its bases, AIG claims that the OTS did consider this subprime lending, in approving AIG's acquisition of American General on July 31, 2001 (after the OTS waived its formal meeting regulations, but conditioned approval on granting requests for meetings on AIG's CRA plan). The facts remain, including that this subprime lending unit makes loans at interest rates up to 40%....
Update of September 10, 2001: AIG, which while applying to acquire American General downplayed any layoffs that would ensue, last week announced 1,500 layoffs. American General's CEO Robert Devlin, who was slated to become AIG's Vice Chairman, has departed. This is called hard-ball. As has been AIG's strong-arming of Hyundai Securities and the Korean government, to lower an already-agreed upon price. AIG won that fight on September 9; earlier in the week, AIG announced that its and the U.S. Trade Representative's pressure on China has resulted in a continued special deal for AIG in China: AIG says it will not be required to reduce ownership of any of its 100%-owned operations, and will remain the only foreign insurance company in China allowed 100% ownership. One wonders why AIG has not yet joined Nike, McDonalds and other companies as acknowledged poster-children of the corporate domination of the globalization process. Perhaps it's that insurance is not as in-your-face as sneakers and hamburgers. But neither Nike nor McDonalds could have pulled off what AIG has, in China. Without a successor, though...
Update of September 4, 2001: Immediately after AIG closed on its acquisition of American General, AIG's Maurice "Hank" Greenberg told reporters that AIG is set to announce lay-offs after Labor Day. " "There will definitely be layoffs. That, unfortunately, is inevitable," he said. The Delaware office may face the first cuts, Greenberg said, although he said he couldn't provide details. Delaware is where AIG's federal savings bank is based...
Last week, the New York Banking Department ruled on AIG's appeal of the NYBD's previous decision to release information concerning American General's subprime lending for which AIG had requested confidential treatment. The NYBD's August 27 letter informs AIG that much of the withheld information will be released "fifteen days after the date of this letter." But AIG's purpose as accomplished: to keep the information redacted until the acquisition was completed.
Meanwhile, AIG's stock price has declined 21% in 2001. The Financial Post (8/30) reports that about half of AIG's revenue comes from outside the United States, with the bulk coming from Asia. AIG's most recent proposal -- a $858 million offer for three financial affiliates of South Korea's Hyundai Group -- has descended into acrimony. "We don't know if it was miscommunication or what," Greenberg said. But AIG won't wait long, he said.. The Korea Herald (8/29) editorializes: "It was all the more deplorable that [AIG's] blatant threat came before the ink dried on a memorandum of understanding the AIG consortium had signed with the Korean government last Thursday."
Update of August 28-29, 2001: The Texas Department of Insurance (TDI) held its hearing on August 28. ICP had commented to the Department from August 2 onwards. TDI scheduled a hearing for September 5, then, "at the request of AIG," switched the hearing date to August 28. ICP, in a supplemental comment, asked to be allowed to participate and testify by telephone, as ICP has been permitted to do in Form A (insurance merger) proceedings in two other states.
On August 24, TDI's Assistant General Counsel wrote to ICP stating that "We have given your request for participation by telephone serious consideration. However, in order to be equally fair with all participants, we have determined not to provide alternatives to some that are not available to all participants." ICP renewed its request, noting that TDI could post a notice on its Web site that anyone could call in and testify, and that TDI had not shown this concern "to be equally fair with all participants" when it changed the date of its already-scheduled September 5 hearing, "at the request of AIG."
On August 28, TDI again wrote (and faxed) ICP, stating that
We have received your written comments and they will be considered along with comments received at today's hearing. At the time notice was given for this hearing we did not envision a teleconference. When we received your request, we gave the matter serious consideration. Providing a teleconference hookup... would provide you an advantage not provided to other participants. This benefit would also be an element that was not included in our public notice. We therefore concluded that it would not be fair to provide this benefit to you that we could not offer to others that may have desired this accommodation. We welcome your input and will consider all of your comments.
ICP thought: this instance on not providing a "benefit" that not provided in a public notice is strange, from an agency which, after providing public notice of a September 5 hearing, moved the date up a week, at the request of the applicant. Still, ICP thought, maybe this concern about fairness meant that TDI anticipated many other in-person witnesses at the hearing in Austin.
Well, at the hearing on August 28, the only witnesses were TDI staff, AIG, American General and their outside counsel, from Akin Gump. TDI Commissioner Montemayor began the hearing by reading a script, that the hearing was being held due to "legislative and public interest," that each witness would only be given five minutes, and that the purpose of the hearing was to take in new information. Then a TDI staffer spoke; then AIG's general counsel, then American General's counsel, then the Akin Gump counsel (who urged fast approval, so that the two companies' stock prices could not be "manipulated" any more). The TDI staffer spoke again, saying that she was "ready to listen to any public comments." Commissioner Montemayor said, "We have been provided with information that we will consider in making our decision," and closed the hearing.
Later on August 28, the Texas Department of Insurance approved AIG's application. Apparently, TDI was so concerned about being "equally fair to all participants" that it excluded the only members of the public that requested (and re-requested) to testify. We will not characterize this proceeding, because we think that it... speaks for itself.
One note: as to American General's (subprime) consumer finance business, analyzed below on this page, AIG stated that it will "deploy American General's expertise in domestic consumer finance" to boost AIG's global consumer finance, and to diversify AIG's earnings. Great...
Update of August 27, 2001: On August 22, AIG submitted a response to ICP's comments to the Texas Department of Insurance (which is holding a hearing on August 28, and will decide on AIG's application thereafter). AIG moved its rhetoric up a notch -- now, AIG is threatening civil litigation, or specious legal ethics complaints, against those who raise questions about its applications for regulatory approval. In purported response to ICP's comments "question[ing] the veracity of a sworn statement provided by AIG in connection with a hearing conducted earlier this month by the Arizona Office of Administrative Hearings," AIG's August 22 letter states:
AIG reaffirms that the sworn statement is true and complete. Defaming the honesty and personal integrity of a member of AIG management, or of any individual, is a serious matter. ICP provides virtually no support for its position, stating only that 'ICP has been informed that the issue was raised to American General in May 2000.' AIG trusts that ICP is not implying that AIG knowingly issued a false statement under oath as ICP has provided no evidence of this. Such a charge would be defamatory and subject ICP to serious potential civil liability and [ICP's executive director] to a potential disciplinary action in his capacity as an attorney licensed to practice in New York.
This is a new low. Below are summaries of ICP's August 27 comment to the Texas Department of Insurance, and ICP's August 27 letter to the New York Banking Department, formally requesting reconsideration of the NYBD's August 14 approval, which was rendered while AIG was still withholding presumptively public portions of its submissions about subprime lending:
August 27, 2001
Texas Department of Insurance
Attn: Commissioner Jose Montemayor,
Assistant General Counsel Gene Jarmon,
and Eileen Shiller, Financial Analysis/Examination, et al.
333 Guadaloupe Street
Austin, Texas 78714
Dear Commissioner Montemayor, Mr. Jarmon, Ms. Shiller:
On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center, and in my personal capacity (collectively, "ICP"), this letter supplements the Comments we submitted on August 2, 13 and 16, 2001, opposing the applications (Form A) filed by AIG to acquire American General's Texas-domiciled insurer(s).
Since our August 16 comment, we received two phone calls from the Department's Assistant General Counsel, Mr. Jarmon. On August 22, Mr. Jarmon informed ICP that the Department does not have the facilities to allow ICP to testify by telephone. ICP responded that the switch in the hearing date from September 5 to August 28 made it more difficult (and expensive) to travel to Austin, and that ICP was requesting to testify via a speaker phone in the hearing room. On August 24, ICP received a letter from Mr. Jarmon stating that "in order to be equally fair with all participants, we have determined not to provide alternatives to some that are not available to all participants." ICP encourages the Department to allow other witnesses to testify by telephone. If the other purportedly disadvantaged participant is AIG, ICP notes that the Department has already granted an AIG request much more extreme that ICP's request to testify by telephone: the Department switched its hearing from September 5 to August 28, explicitly "[a]t the request of American International Group, Inc. (AIG) and American General Life Insurance Company...". Particularly in light of the material below, ICP renews its request that a speaker phone be placed in the hearing room, and that ICP be allowed to testify by telephone, at its own expense. A notice of the opportunity to testify in this manner could and should be placed on the Department's above-quoted Web site.
On August 22, AIG purported to respond to ICP's Comments. AIG faxed a copy of its letter to ICP on August 23, after close of business. ICP was most struck by AIG's statements on page 5:
ICP Claim #11: ICP questions the veracity of a sworn statement provided by AIG in connection with a hearing conducted earlier this month by the Arizona Office of Administrative Hearings.
AIG's Response: AIG reaffirms that the sworn statement is true and complete. Defaming the honesty and personal integrity of a member of AIG management, or of any individual, is a serious matter. ICP provides virtually no support for its position, stating only that "ICP has been informed that the issue was raised to American General in May 2000." AIG trusts that ICP is not implying that AIG knowingly issued a false statement under oath as ICP has provided no evidence of this. Such a charge would be defamatory and subject ICP to serious potential civil liability and Mr. Lee to a potential disciplinary action in his capacity as an attorney licensed to practice in New York.
As the record before the Department shows, ICP has in each of its Comments questioned when American General first learned that one of its predecessor companies wrote insurance policies on slaves. AIG has yet to provide a factual response to this simple question. Here is how ICP put it, in its August 16 (and August 2) comments:
at the August 2, 2001, hearing of the Arizona Office of Administrative Hearings, AIG's lead witness stated that AIG first became aware of it when ICP submitted it to the Arizona Department on August 1, and that he immediately telephoned American General's general counsel and executive vice president for governmental affairs, who stated that they had not been aware of it.
ICP has been informed that the issue was raised to American General in May 2000, including in a detailed message, which included the number of the policy, the name of the policy holder, and the date, to American General official John E. Pluhowski (who is listed as American General's contact on nearly every American General press release). An American General staffer, Nicole, had indicated that Mr. Pluhowski was the appropriate official to whom this information should be directed. (To further document for the record the relevance of this issue, consider California Insurance Code Section 13810, et seq.).
This is a matter to be explored at the hearing -- it reflects not only on American General, but also on AIG: the quality of AIG's due diligence, and AIG's lead witness' sworn statement at the August 2 Arizona hearing (the Department should request and obtain a copy of the transcript of the Arizona hearing).
--emphasis added; footnote omitted.
AIG's August 22 letter, like its August 15 letter, evades the question. AIG's August 22 letter goes further, and threatens ICP with civil litigation and/or a specious legal ethics complaint. AIG's August 22 letter states that "ICP provides virtually no support for its position...". Attached hereto is a statement from the individual who raised this matter to American General on May 18, 2000, and a copy of the individual's telephone bill, reflecting four calls on that date to American General.
We also note that, in light of AIG's just-announced $1.6 billion acquisition of a securities brokerage in South Korea, AIG's Form A presentation should be updated, in advance of the hearing. See, e.g., Reuters news wire of August 24, 2001.
In this light, ICP renews its request to testify by telephone at the hearing (the date of which the Department switched, at AIG's request). ICP has commented and provided evidence directed at the statutory factors that the Department must consider. AIG has evaded the issues raised, and, rather, has ham-handedly threatened ICP with civil litigation and/or a specious legal ethics complaint, for even having raised the issue. The Department should not allow such behavior by an institution which it regulates, much less benefit such an institution by switching the date of an already announced hearing, and then excluding the participation of a timely commenter who has requested to participate in the date-switched hearing by telephone. On the current record, the Department could not legitimately approve AIG's applications.
ICP intends to present further information at the August 28 public hearing (see supra), including concerning questionable insurance practices. To provide the confirmation requested above, please contact me at your soonest convenience, at ICP's headquarters office at (718) 716-3540; fax (718) 716-3161. Thank you for your attention.
Very Truly Yours,
Matthew Lee, Esq.
Executive Director
cc: Ernest T. Patrikis, Esq.
American International Group, Inc.
* * *
August 27, 2001
New York State Banking Department and Board
Attn: First Deputy Superintendent Daniel A. Muccia, et al.
Two Rector Street
New York, NY 10006
Dear Mr. Muccia, Board Sec't Christine Tomczak, others:
On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, "ICP"), this letter formally requests reconsideration of the First Deputy Superintendent's August 14, 2001, approval of the above-captioned Applications.
As set forth below, ICP contends that the Department should not have approved AIG's application while ICP had still not received, and been permitted to comment on, information concerning American General's subprime lending for which AIG improperly requested confidential treatment. The Department's Acting First Assistant Counsel's August 14 letter to AIG ruled that AIG's requests for confidential treatment were unwarranted, and gave AIG ten days to appeal. In light of the Department's past practice, which ICP believed was a Department policy, of allowing a timely protestant to comment on all portions of an applicant's submissions which are not exempt under the Freedom of Information Law ("FOIL"), once ICP received its copy of the Acting First Assistant Counsel's August 14 letter, ICP then awaited the improperly withheld material. But the Department went forward and approved AIG's applications, in contravention of the Department's past practice, and principles of public participation that are embodied, for example, in the Office of the Comptroller's regulation at 12 C.F.R. 5.10(b)(2)(i) -- "(2) Extension. The OCC may extend the comment period if: (i) The applicant fails to file all required publicly available information on a timely basis to permit review by interested persons or makes a request for confidential treatment not granted by the OCC that delays the public availability of that information...". Accordingly, ICP asks that the Department suspend or stay its August 14 approvals, release to ICP the improperly withheld information, and allow ICP to comment thereon.
Background
ICP timely protested the Applications, from July 2 onwards. ICP's submissions, which are incorporated into this request by reference, including evidence of American General loans at interest rates as high as 40%, 36% and 32%, most with high-cost credit insurance.
On July 26, 2001, Deputy Superintendent Kramer posed 12 questions to AIG, on issues directly related to those raised in ICP's comments. AIG's response was due on August 2.
On August 1, ICP asked AIG's outside counsel for a copy of the response (at least those portions for which AIG did not make a request for confidential treatment).
On August 2, ICP submitted a supplemental comment, with attachments, and noted therein its request for a copy of AIG's response, in order to comment thereon, as has been the practice in other similar cases.
On August 3, ICP telephoned Mr. Brooks and Mr. Kramer, inquiring into when it would receive a copy of AIG's response. ICP also submitted a Freedom of Information Law ("FOIL") request.
On Monday, August 6, ICP received a phone message from Mr. Kramer, that ICP would be receiving a copy of AIG's response.
On Tuesday, August 7, not having received any portion of the response, ICP contacted Mr. Kramer by telephone.
On Wednesday, August 8, the undersigned returned a phone message from AIG's general counsel, who expressed a willingness to meet about the issues at some future date (and see infra). ICP asked about AIG's response to the NYBD; AIG's general counsel responded that he's asked someone to provide it, or some of it, to ICP.
Minutes after this brief phone conversation, AIG faxed ICP a copy of a letter it had directed to the Superintendent. AIG's letter thanked the Department for its diligence in reviewing AIG's application, stated that "when the transaction is closed I will continue to be here personally to respond to the Department's concerns," and that "after the transaction closes, I also plan to meet with Mr. Matthew Lee to further discuss his concerns. I have put in a call to him to get that underway."
Concerned by the tone of the letter, ICP inquired with the Department. ICP came away from telephone discussions with two Department staffers with the understanding that it would be provided with the portions of AIG's response that do not qualify for FOIL exemptions, and with an opportunity to comment thereon, prior to the NYBD's decision on AIG's applications. ICP has already informed the Department tha