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AIG sues ex-CEO Greenburg

by | Mar 29, 2008 | Corporate Financing Irregulatories | 0 comments

Business Times – 29 Mar 2008

Company claims he ‘misappropriated’ US$20b in shares

(NEW YORK) American International Group, the world’s largest insurer by assets, sued the company’s former chief executive officer, Maurice ‘Hank’ Greenberg, claiming he ‘misappropriated’ AIG shares worth US$20 billion. AIG claims Mr Greenberg and six other former executives, including ex-chief financial officer Howard Smith, took over company stock held by an AIG affiliate, Starr International or SICO, in 2005.

Starr is AIG’s largest shareholder. AIG claims the defendants put themselves on Starr’s board and converted the stock into a private investment vehicle for their benefit.

‘Greenberg engineered a coup d’etat to usurp full control of SICO’s board of directors,’ AIG said in a complaint filed on Wednesday in New York state court in Manhattan.

AIG’s filing escalates the legal conflict between Mr Greenberg and the company he led for 38 years.

Mr Greenberg was forced to retire from AIG in March 2005, two months before then-New York State Attorney General Eliot Spitzer sued and Mr Greenberg, accusing him of ordering improper transactions to hide losses and inflate reserves.

Mr Spitzer dropped portions of the lawsuit that included four allegations tied to the investigation in 2006. Mr Greenberg denies any wrongdoing in that case, which is still pending.

AIG claims Mr Greenberg and the other defendants breached their duty to AIG, and said Mr Greenberg plans to sell or encumber the stock and use it ‘to start a venture capital and private equity firm to make investments in Eastern Europe, the Far East and the Middle East’.

The complaint seeks to prevent Mr Greenberg and other defendants from selling the stock.

The Starr shares had been used as special compensation for select employees of AIG, the insurer said in the complaint.

AIG filed a related suit against Starr International in federal court in Manhattan which is pending.

‘We were forced to file the claims now prior to the three-year anniversary of the commencement of the conduct giving rise to the AIG claims for breach of fiduciary duty,’ said Chris Winans, an AIG spokesman.

‘This is a protective action to preserve our claims against these individuals personally,’ Mr Winans said.

Mr Winans said Mr Greenberg and the other defendants had refused to extend the three-year legal deadline for filing such a lawsuit based on alleged conduct in 2005, forcing AIG to sue now.

Glen Rochkind, a spokesman for Starr International, said: ‘We expect to be successful in dismissing this additional merit-less lawsuit by AIG involving Starr International. This is little more than forum-shopping, since AIG’s earlier lawsuit against Starr International has not been successful in federal court.’ AIG’s federal suit seeks to wrest control of 290 million company shares from Starr International.

Mr Greenberg has sold shares through Starr valued at more than US$3 billion last year as the firm invested in ventures including Chinese private equity and Russian real estate\. \– Bloomberg

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