Greenberg, Former AIG Execs Settle Shareholder Louisiana Pension Fund Lawsuit

Maurice "Hank" Greenberg, and several other former executives of American International Group Inc (AIG), agreed on Thursday to settle a long-standing shareholder lawsuit for $115 million. AIG will receive proceeds from the settlement, less fees. The settlement prevents the case from going to trial, which was to slated to begin next week in Delaware.  
  
Greenberg's company, C.V. Starr & Co., gave the men bonuses based on fees from New York-based AIG, according to a lawsuit by a Louisiana pension fund. Greenberg, 83, stepped down as AIG's chief executive officer in March 2005 amid accounting probes that led to a $3.4 billion restatement of profits.  
  
"Hank really wanted to redeem himself, so the fact that he had to pay even a dollar still creates a cloud over his head,'' said Phillip Phan, a professor of management at Johns Hopkins University in Baltimore. "It allows him to get on with his life, but it doesn't solve his reputation problem.''  
  
The Teachers' Retirement System of Louisiana claimed that almost half of the $2.2 billion that AIG paid to Starr from 2000 to 2005 represented sham commissions and fees for work that, in some cases, was done by AIG employees. Investors also questioned why some AIG executives were allowed to serve simultaneously as officers of C.V. Starr, a closely held insurance agency, while profiting from business between the two companies.  
  
Insurance will cover about 75 percent of the settlement, Stuart Grant, the pension fund's lawyer, had reported. Greenberg and the other defendants are responsible for $29.5 million, an amount that may be covered by separate insurance policies, Grant said.

Published on September 12, 2008