Authorities in New York have filed a fraud lawsuit against American International Group and two former top executives of the insurance giant.
AIG has been the subject of an investigation by Mr Spitzer(left)
New York Attorney General Eliot Spitzer brought the suit against the world's biggest insurer after an inquiry.
The suit also claims former AIG chief Maurice "Hank" Greenberg and ex-finance officer Howard Smith committed fraud and manipulated AIG books.
It is alleged there was an attempt to deceive regulators and investors.
The civil suit mentions e-mails and other evidence that alleges Mr Greenberg was personally involved in negotiating fraudulent deals.
It also alleges he directed AIG staff to help put together other misleading transactions.
"The former top management routinely and persistently resorted to deception and fraud in an apparent effort to improve the company's financial results," Mr Spitzer said in a written statement.
No figure for compensation is mentioned in the suit, but it asks for punitive damages, the repayment of any gains made, and restitution to anyone hurt by the alleged deceptions and manipulation.
At the beginning of May, AIG said it would restate its accounts for each of the last five years from 2000 onwards, lowering the company's value by 3.3%.
It said it had found "material weaknesses" in its control systems, and postponed filing its 2004 accounts.
Mr Greenberg, 80, resigned as chief executive and chairman of AIG in March, after nearly four decades at the helm of the insurance company.
Mr Greenberg led AIG from 1967 to earlier this year
Mr Smith was fired about a week later for failing to cooperate with investigators.
A dozen AIG directors, including Mr Greenberg, received subpoenas from the US Securities and Exchange Commission (SEC) in March.
Last month Mr Greenberg was called to testify before Mr Spitzer's staff, representatives from the SEC, and lawyers from the New York state insurance department.
However he refused to answer questions from regulators, invoking rights under US law which protect people from self-incrimination.
'Not shockingly bad'
The insurance industry probe by New York's chief law officer and US market watchdogs reflects the new, tougher attitude towards standards on Wall Street since the Enron and Worldcom scandals.
AIG has already accepted that its accounting for a transaction with reinsurance firm General Re in 2000 - which appeared to boost AIG's revenues at a time when the market was uneasy about the insurer's liabilities - was improper.
By restating its accounts from 2000 onwards, it said it would "correct errors in prior accounting for improper or inappropriate transactions".
Commenting on the new civil suit, Williams Capital Group analyst, Peter Streit, said: "It's not anything shockingly bad."
He added: "It appears the Attorney General [Mr Spitzer] is trying to put a lot of the blame on Hank Greenberg himself."