Officials at American Insurance Group Inc. announced the retirement of Chairman Maurice “Hank” Greenberg, effective either March 30 or 31.
Greenberg, 79, is generally credited with building AIG into a global insurance powerhouse during his 37 years at the company. But he leaves amid a hornet’s nest of controversy. Indeed, the decision to retire comes amid regulatory investigations launched by the Securities and Exchange Commission and New York State Attorney General Eliot Spitzer into financial deals AIG structured for customers. Those deals include transactions related to finite insurance products — a nontraditional insurance offering.
The retirement comes just two weeks after AIG board members asked for Greenberg’s resignation as CEO, a position he held along with the title of chairman. In a letter sent to the board by David Boies, Greenberg’s attorney, Boies indicated that “Mr. Greenberg’s intention has always been to leave AIG as part of an orderly succession process …”
In that letter, Boies goes on to express Greenberg’s apparent concern about supposed leaks to the press by AIG insiders. “… it is not in the interests of the company or its shareholders,” Boise writes, “to have members of the Board or their representatives prematurely and selectively leaking to the press (sometimes accurately and sometimes inaccurately) what has been discussed and proposed at meetings of members of the Board …”
Despite Greenberg’s resignation, the problems at AIG continue to fester. The insurance giant was dealt another blow on Monday when attorneys representing independent AIG directors admitted to regulators that they uncovered evidence suggesting the company regulatory filings may have mislead investors and regulators, reported the Wall Street Journal, citing people close to the matter. Based on the paper’s report, AIG lawyers said that the accounting for 50 separate AIG transactions could result in $1.5 billion worth misstatements.
The transactions were reportedly all carried out with one Barbados company, and it appears that liability was incorrectly shifted to that offshore entity. According to the Journal, AIG is hiring forensic accountants to go over the last few years worth of company financial statements to track the problem.
Within the past 10 days, three top AIG executives were fired for reportedly failing to cooperate with the investigations, including L. Michael Murphy, a tax policy expert, director of AIG’s offshore units, and described by the Journal as a long-time confident of Greenberg; CFO Howard Smith; and vice president for reinsurance Christian Milton. According to the paper, about 12 senior AIG executives are being subpoenaed in the SEC investigation.
In a related story: famed value investor Warren Buffett is also being drawn into the AIG fray, reports The Wall Street Journal. Apparently, Buffett, the chairman and CEO of Berkshire Hathaway Inc., will be questioned next month by the SEC and Spitzer’s office about whether he had any involvement in an insurance deal completed in 2000 between Berkshire Hathaway’s General Re unit and AIG. Buffett is expected to go before the regulators on April 11. Greenberg is slated to give his deposition to regulators the next day.
Reportedly, the General Re transaction is at the center of a larger regulatory probe into nontraditional insurance products. Investigators are looking into whether these products allow companies to improperly inflate financial performance by using reinsurance.