American International Group (AIG), the world's largest insurance company, has announced it will pay $1.64 billion to settle a lawsuit spearheaded by New York Attorney General Eliot Spitzer. The settlement resolves a joint investigation into AIG's accounting practices while the company was under the leadership of Maurice "Hank" Greenberg, previously chairman and CEO. According to a statement released by the New York Attorney General's (NYAG) office, "AIG has acknowledged misconduct, adopted a series of groundbreaking reforms and agreed to restitution and reforms." The agreement was announced simultaneously with the other agencies investigating AIG, which included the New York State Department of Insurance, the Securities and Exchange Commission (SEC) and the federal government's Department of Justice.

"AIG was and is a solid company that didn't need to cheat," Spitzer said in the statement. "It finds itself in this position solely because some senior managers thought it was acceptable to deceive the investing public and regulators. However, by changing management, implementing reforms and providing restitution to injured investors, customers and states, the company has placed itself on a path toward resurgence." According to the agreement, $800 million of the settlement will be paid directly to investors deceived by false financial statements. $375 million will be awarded to AIG policyholders harmed by bid-rigging activities, with another $344 million going to states harmed by AIG's practices between 1986 and 1995.

"It was important that we resolve these outstanding investigations" said AIG's President and CEO Martin Sullivan, in a statement. "AIG has fully cooperated with these authorities throughout their investigations, and we will continue to do so."

"These settlements are a major step forward in resolving the legal and regulatory issues facing AIG," he continued. "We have already implemented a wide range of improvements in our accounting, financial reporting and corporate governance, and will continue to make enhancements in these areas. AIG is committed to business practices that provide transparency and fairness in the insurance markets."

As part of the agreement, AIG will stop paying contingent commissions for certain types of insurance and will support Congressional legislation regulating these types of compensation.

According to all parties involved, the settlement does not conclude or resolve the ongoing investigation of Greenberg and the company's then-Chief Financial Officer Howard Smith. Greenberg and Smith have both denied any wrongdoing and have vowed to fight any allegations. In an interview today, Spitzer targeted both men who were once at the center of the investigation which concluded today. "There are some who continue to deny any wrongdoing at the company," said Spitzer. "I think the facts laid out today are overwhelming in establishing that from the highest levels of AIG there was an intent to misrepresent the financial condition of the company."