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D&O Insurers for Greenberg and AIG Execs Settles Investors' Fraud Lawsuit

Posted on 27 Aug 2010

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According to a filing in a Wilmington, Delaware court, insurance companies for American International Group, Inc. (AIG) have agreed to a settlement in a derivative lawsuit against former AIG chief executive officer Maurice Hank Greenberg in which he was accused of defrauding company investors to the tune of $90 million.

As part of the agreement, AIG's insurers will pay the money directly to AIG rather than individual investors to settle claims that Greenberg and other top directors and executives hid AIG's deteriorating financial condition via various accounting tricks and fraudulent schemes.

The settlement comes on the heels of another costly agreement involving AIG. Just last month, investors who lost money during AIG’s swift stock slide garnered an agreement from the insurer to separately return $725 million to them.

Spokespersons for AIG say they are pleased the matter has been resolved.

AIG’s $200 million D&O policy will pay the costs associated with the agreement, with $90 million going to AIG and another $60 million earmarked to cover legal fees for Greenberg and other AIG executives, according to the filing.

The price tag for Greenberg himself? Zero, says Lee Wolosky, an attorney with Boies, Shiller & Flexner LLP, who represents the 85-year-old former CEO. According to Wolosky, all litigation between the former CEO and AIG “was settled with Mr. Greenberg paying nothing and other parties paying money to Mr. Greenberg.”