The New York Attorney General's Office, which is negotiating the settlement with AIG after bringing legal action against the company in May of 2005, said last month it was nearly ready to settle the case.

Attorneys were making progress and "anticipate something happening before the end of the year [2005]," a spokesman said. Today, spokesman Brad Maione reported that discussions are "progressing," but there is no agreement and there should be no speculation about possible outcomes.

The purported $1.5 billion agreement surprised Mr. Meredith, who wrote that Bank America was "expecting a much lower figure." However, he noted that AIG clients were not damaged in the accounting scandal, and any restitution would likely go to AIG shareholders, which would be settled with the securities lawsuits.

The settlement payment reportedly could be parceled out among fines, restitution and payments to state workers' compensation funds--which AIG, according to New York Insurance Superintendent Howard Mills, was suspected of shortchanging.

The biggest reported sticking point in settlement negotiations is said to be restrictions on or disclosures of contingent commissions, which AIG is reportedly resisting unless regulators put similar restrictions on its competitors.

Mr. Meredith wrote that by going after the insurer on contingent commissions, it might have the effect of leveling the playing field among insurance brokers. To date, only the largest insurance brokers have agreed to stop accepting contingency commissions, which puts them at a competitive disadvantage vis-?-vis small- and mid-sized brokers that still collect them. "Changes at insurers would likely impact all insurance brokers," Mr. Meredith wrote.

Any settlement would not include Maurice Greenberg, AIG's former chairman and chief executive officer, whom N.Y. Attorney General Eliot Spitzer accused of personally approving accounting misdeeds. Mr. Spitzer's office has said they do not intend to proceed against Mr. Greenberg with criminal charges.

In the past, when questioned by state and federal investigators, Mr. Greenberg has not answered, invoking his Fifth Amendment right against self-incrimination. He has also issued statements vigorously denying any impropriety and challenging AIG's admissions that some accounting activity involving finite reinsurance deals was "improper."

Today, Mr. Greenberg's spokesman Howard Opinsky issued a statement concerning the reported settlement that included a slap at Mr. Spitzer who is campaigning to be the Democratic candidate for New York governor.

"Regardless of AIG's decision, Mr. Greenberg intends to challenge allegations of misconduct at trial and is confident he will prevail," Mr. Opinsky said.

He added, "Shareholders lose when companies choose to settle investigations motivated by political ambition, fueled by threats and settled out of fear. Even if all the allegations were to be believed, a settlement of this magnitude is merely a political trophy for the Attorney General and totally disproportionate to the impact of the alleged misconduct."