The developing scandal at AIG has also put PricewaterhouseCoopers, the largest independent auditing firm in America, in the spotlight. For now SEC investigators, working with Spitzer’s officials, are trying to find out what AIG told its auditors about the deals under scrutiny. At some moment, the auditor will inevitably be asked why it missed the improper accounting.

When, last Friday, a lawyer acting for Maurice 'Hank' Greenberg, began carting boxes of documents from a branch office of American International Group Inc in Bermuda, he set in motion events that swiftly brought down the legendary chairman of the insurance giant. The next day lawyers acting for AIG found that computer records and tapes of business meetings had also disappeared. New York Attorney General Eliot Spitzer wasted no time in telling AIG's lawyers that so long as Greenberg was chairman, AIG was accountable and he would indict the company if the 79-year-old chairman did not resign immediately. No financial firm has survived a corporate indictment, but nevertheless Greenberg, who built AIG into a firm with revenues of $98.61 billion last year, resisted. However, by last Monday AIG's independent directors, including ex-US Secretary of Defence William Cohen and former US ambassador to the United Nations Richard Holbrooke, had effec tively taken control of the firm. They refused to offer Greenberg the title of 'director emeritus' and insisted he retire in what Greenberg is said to regard as a palace coup. It was an ignominious end to four decades of imperious rule at AIG. The speed of Greenberg's fall left no one in any doubt that accounting at the world's top insurance firm has been seriously amiss. Indeed, two days later AIG confirmed that 14 years of improper accounting could cut its net worth by as much as $1.77 billion. But analysts believe this is only the tip of the iceberg and an investigation that started with the practice of reinsuring business through off-shore firms it owns may run far deeper. Since it was made public in mid-February, the fallout from Spitzer's criminal investigation has cost AIG 20 per cent of its value. It is not the first insurance giant Spitzer has collared. Last year, the world's largest insurance broker, Marsh & McLennan, was shown to have betrayed its clients by steering their insurance business to favoured underwriters in exchange for millions in backdoor payoffs. In exchange for the resignation of Jeffrey Greenberg, Hank's son, guilty pleas from several executives and an as yet-to-be determined fine of as much as $2 billion, plus reforms, Spitzer agreed not to criminally indict the company. But his investigation into AIG may go further. The investigation has put legendary investor Warren Buffett, the so-called sage of Omaha, in the spotlight. Buffett is one of the world's most successful insurers through his firm, General Re, a unit of Berkshire Hathaway. Investigators are looking at a deal Greenberg struck in 2000 with Buffett that enabled AIG to add to its reserves but in a way that that did not assume any risk (improper, say regula tors, because without risk the $500 million in question should have been treated as a loan by accounting standards). According to people close to the investigation, General Re is 'at the centre of the storm'. Buffett, who is set to appear before investigators on 11 April, denies detailed knowledge of the reinsurance contract in question. How close the scandal will get to Buffett himself remains open to question, but it is uncomfortable for him to be in such close proximity.

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