Ambac Meets With Wisconsin Regulators

NEW YORK (TheStreet) -- Wisconsin Insurance Commissioner Sean Dilweg traveled to New York to meet with executives from Ambac Financial (ABK Quote) and the investment bank Jefferies yesterday.

Jim Guidry, a spokesman for Wisconsin's insurance regulator, says it was a "pre-arranged meeting to discuss regulatory business," but he declined to say what was discussed. Ambac spokesman Peter Poillon wouldn't say who attended the meeting from his company.

Dilweg's office said on Wednesday it was exploring "strategic alternatives" with Ambac's board, after the company's bond-insurance unit disclosed significant misstatements in its financial filings. The incorrect information enabled Ambac Assurance to exceed Wisconsin's capital minimums. In a filing this week, the company blamed data-entry errors for the erroneous data.

Ambac Assurance, the company's main operating unit, understated impairment charges for credit default swaps by $278.4 million in the second quarter. If the charges had been accurate, Ambac would have failed to meet capital requirements in Wisconsin for the first and second quarters. Ambac also counted $520 million made from fourth-quarter transactions toward its third-quarter results.

Wisconsin's insurance regulator is seeking advice from Jefferies, and has hired lawyers from Foley & Lardner. Guidry and Ambac's Poillon refused to say why Jefferies was hired or how much it was being paid for its expertise. Jefferies didn't immediately respond to a request for comment.

Guidry said he didn't know if lawyers from Foley & Lardner had attended the meeting, but two of the commissioner's deputies participated.

Retaining advisers is expensive. General Motors(MTLQQ Quote) paid more than $85 million for restructuring advice before it went into bankruptcy, according to court documents.

Poillon says Ambac executives "stand behind the financial statements and the disclosures made within." Guidry says the insurance commissioner "has a number of tools in his toolbox and he would decide what action to take, depending on the circumstances," without elaborating.

-- Reported by Gavin Magor in Jupiter, Fla.