Former CEO Sues AIG for Securities Fraud

American International Group Inc. has been sued by former Chairman and CEO Maurice “Hank” Greenberg. Greenberg alleges securities fraud stemming from the misrepresentation of billions of dollars in losses on the company’s portfolio of credit default swaps. The defendants include former directors and officers who Greenberg claims led him to acquire AIG stock at an artificially inflated price as part of a deferred compensation plan. Greenberg claims that AIG overstated its financial health and masked losses on credit default swaps that hedged default risk for at least $527 billion of debt. He alleges that AIG “recklessly ignored” facts suggesting the company was facing ever-increasing losses on the portfolio.

AIG shares closed at $57.37 on Jan. 30, 2008, the day that Greenberg acquired AIG shares through the deferred compensation plans, and closed today at 43 cents. As a result, Greenberg claims that he has lost hundreds of millions of dollars when the stock prices plummeted and now seeks to recover the difference between the price he paid for the shares and the “true and fair” value. He also claims that, as a result, he significantly overpaid income tax on the securities, and seeks to recover more than $70 million of taxes.

Greenberg led the company for almost 40 years until he was forced to resign in March 2005 amid an investigation led by former New York Attorney General Eliot Spitzer and allegations of fraud. It seems likely that the current problems would have begun during his tenure rather than in the relatively short time since his departure. As AIG’s largest shareholder, and in light of his long reign at the company, Greenberg’s level of knowledge regarding AIG’s financial health and risks associated with the portfolio of credit default swaps should be in question.

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One response to “Former CEO Sues AIG for Securities Fraud

  1. I could not trust a man that would willing pose for that picture.

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