March 29, 2005
AIG Chairman Greenberg to Retire As Regulators Probe Questionable Transactions During His Tenure
Maurice "Hank" Greenberg will retire this week as chairman of American International Group Inc., ending a four-decade career with the insurance company as regulators investigate questionable financial transactions that occurred during his tenure.
In a letter sent through his attorney, Greenberg told AIG directors Monday that he would retire when he returns from a trip to Asia and Europe, and won't stand for election as a director when his term expires in May.
The company released the letter late Monday and said lead director Frank G. Zarb would assume the duties of chairman until a new one is selected.
"In order to lead meaningful changes in the industry and at AIG, the company and its officers and directors must resolve any outstanding questions or issues and move forward," according to the letter from Greenberg's attorney, David Boies, to Richard Beattie, who represents AIG's independent directors. "To that end, Mr. Greenberg recognizes the need to promptly and cooperatively resolve all inquiries and investigations by regulators and other authorities."
Greenberg had been at the company's helm for nearly four decades and was a prominent and influential member of the global insurance industry.
There had been widespread speculation about how long New York-based AIG would continue its relationship with Greenberg, as investigations by the Securities and Exchange Commission and New York State Attorney General Eliot Spitzer have intensified in recent weeks.
Greenberg, 79, was replaced as chief executive two weeks ago -- though retained as chairman -- as scrutiny mounted over a 2000 transaction that appeared to have been used to boost the company's reserves artificially.
The separation between Greenberg and the company he built comes as the SEC has sent subpoenas to a dozen AIG executives. A source told The Associated Press, speaking on condition of anonymity and confirming a report Monday in the Journal, that federal investigators know of 10 transactions that warrant review.
In a statement e-mailed to reporters late Monday, Spitzer praised AIG board's for making "difficult decisions."
"While there is a long way to go before this investigation is complete, the wise actions of the AIG board will help set this investigation on a path toward resolution," Spitzer said. "I commend the AIG board for acting in a way that sets it apart from other boards that have faced similar problems in recent years."
Greenberg is scheduled to give a deposition to Spitzer on April 12.
Under investigation are a number of reinsurance transactions -- insurance purchased by insurance companies -- that regulators contend were designed to improve AIG's financial statements without the transfer of risk. Risk transfer is necessary for a deal to be an insurance transaction and determines how it's carried on a company's books.
On Sunday, the company forced out another longtime executive, Michael Murphy, an executive who worked for American International Co., a Bermuda-based unit of AIG. Previously, the company dismissed two other executives -- including Chief Financial Officer Howard I. Smith -- for refusing to cooperate with the probes.
AIG spokesman Chris Winans said Murphy was terminated "for failure to cooperate with investigators." He declined further comment.
The Journal said that Murphy was a confidante of Greenberg and an expert of tax matters. Murphy's attorney, Sean O'Shea, said Sunday that he had not been informed of his client's dismissal, and did not know whether Murphy had been notified.
A number of other AIG executives have been dismissed, including four who entered guilty pleas in the probe launched by Spitzer into bid rigging and price fixing by New York-based broker Marsh & McLennan Companies Inc.
Shares of AIG rose $1.41, or 2.5 percent, to close at $57.02 in Monday trading on the New York Stock Exchange, near the low end of a 52-week range of $54.28 to $77.36.
Winans said that the company is still aiming to release its delayed annual report on Thursday.
He told The Journal that AIG continues to "believe that the matters subject to review are unlikely to result in significant changes to the company's financial position," meaning shareholder's equity.
Greenberg is returning to the United States Wednesday or Thursday.
Posted by Tom Troceen