In posts and articles such as these we have noted that the period immediately following an SEC investigation needs be treated as the "No-Spin Zone." That is, in the days following the conclusion of an SEC investigation or settlement, companies should be careful not to "spin" the resolution beyond its actual terms, or risk a harsh response from the SEC. The recent announcement by insurance company AIG concerning the SEC's view of certain press releases it issued is a reminder that the SEC also appears to consider the No-Spin Zone to include statements characterizing the SEC's investigation while it is ongoing.

According to this article by Reuters,

AIG already faces possible SEC civil charges and a Justice Department criminal investigation into whether one of its units helped Pittsburgh-based PNC Financial Services Group Inc. (NYSE:PNC - News) move $762 million of bad loans off its books, inflating profit by $155 million.

AIG issued the press releases in question on Jan. 30, 2002 and Sept. 21 and Sept. 29 this year. The 2002 release concerned the PNC transactions, the Sept. 21 release said the SEC may file civil charges related to the transactions, and the Sept. 29 release announced a U.S. Justice Department probe.

AIG said in a statement on Monday the SEC believes it misled investors in the 2002 press release when it said it had not entered into other transactions using the PNC structure, when its AIG Financial Products Corp. unit arranged five similarly structured transactions for two insurers.

AIG said the SEC believes the Sept. 21 release should have said the original SEC civil probe concerned these transactions, and that the Sept. 29 release failed to paint a fair picture of the Justice Department probe. Justice is also concerned that the Sept. 29 release was misleading, AIG said.

The insurer said any contention that it made false or misleading statements lacks merit.

As noted in this article, AIG appears to be taking the position that its statements were not misleading because "unlike the PNC transactions, none of the [other 5] transactions had the primary purpose of moving troubled, volatile or underperforming assets off the balance sheet of the counterparty."

This article goes on to ask:

"What's even more troublesome is the additional charge that by denying civil liability AIG committed another breach of the Securities laws. Since when is saying "I did nothing wrong" an actionable tort?"

Cast in this light, the SEC's displeasure with AIG's press releases looks somewhat like the securities fraud charge leveled (and then dismissed) against Martha Stewart after she asserted her innocence. In any event, this situation is a reminder of the SEC's rapt attention to statements made by companies both during and after its investigations.