Update Thurs Apr 14- The Washington Post reports today that former American International Group Inc. Chief Executive Maurice R. "Hank" Greenberg's transfer of more than $2 billion worth of AIG shares to his wife probably would not survive a court challenge, legal experts said Wednesday.
Greenberg, who faces shareholder lawsuits and who has been questioned in a federal and state investigation into AIG accounting, disclosed in a regulatory filing on Tuesday that he gave his wife, Corinne P. Greenberg, 41.4 million AIG shares, most of his holdings in the company.
The transfer of stock worth about $2.1 billion, based on AIG's closing price of $51.61 on Wednesday, occurred on March 11, three days before Greenberg stepped down as AIG's chief executive. Legal experts said the gift appeared to be an effort to shield most of Greenberg's fortune from possible attempts at recovery by the government or private lawsuits.
The Washington Post says that a person close to Grrenberg said that the transfer was largely to protect against frivolous lawsuits and that Greenberg does not expect the shares to be out of the government's reach if it sought to recover assets. Greenberg has not been accused of any wrongdoing.
The person said that by law Greenberg did not have to report the transfer to the SEC until February 2006. The person, who spoke only on the condition of anonymity because of not being authorized to speak on the topic, said Greenberg executed the transfer in consultation with his estate-planning attorneys, not his criminal lawyers.
Earlier report:
Maurice "Hank" Greenberg (79), the ousted CEO of insurance giant AIG, is scheduled to meet regulators and law enforcement officials in New York today, who are investigating fraudulent accounting transactions at AIG.
Greenberg will plead the Fifth Amendment to avoid self-incrimination as he claims that he has not had adequate time to prepare for the meeting.
In a statement Monday, Greenberg's lawyer said: "The great number of transactions under inquiry, the thousands of documents relevant to these transactions to which Mr Greenberg has not yet been given access, and the fact that many of these transactions took place from 5 to 20 years ago, have precluded Mr Greenberg from adequately preparing for this testimony at this time."
Last week, Boies requested New York Attorney General Eliot Spitzer to postpone Greenberg's deposition to allow him more time to prepare. However, Spitzer denied his request.
On Monday,Greenberg himself issued a statement saying he was familiar with "many, but certainly not all, or even a significant percentage of" the millions of transactions each year at AIG.
"I am willing to accept responsibility and to account for the performance of my duties," Greenberg said. "But I believe that good order and fairness require that I have an adequate opportunity to be advised of the issues to be investigated and to my alleged involvement therein. Many other decisions and actions were taken by others in the company without my participation."
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| Maurice Greenberg (left) in happier times, pictured with the AIG Board. In almost four decades, Greenberg built AIG into the world's biggest insurers. Voluntary retirement wasn't an option for a man who ran his company with an iron fist. |
Central to the regulatory investigations is a deal Greenberg agreed in late 2000 with General Re, a unit of Berkshire Hathaway, the company controlled by Warren E. Buffett. The arrangement artificially inflated AIG.'s reserves by $500 million; reserves are the funds an insurer sets aside to pay future claims. Changes in an insurer's reserves are closely watched by investors.
The investigation has expanded well beyond one transaction and an internal review by AIG has initially identified about a dozen improper transactions that might have to be reversed.
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| In this photo issued by ABC News, New York Attorney General Eliot Spitzer, discusses the AIG insurance fraud investigations and this week's meetings between regulators and Warren Buffett and Maurice "Hank" Greenberg, on ABC's This Week with George Stephanopolous television program. |
New York Attorney General Eliot Spitzer said Sunday on the ABC News This Week with George Stephanopoulos television program, that he had strong evidence that Maurice “Hank” Greenberg (79), the ousted Chairman and CEO of insurance giant AIG, committed fraud in initiating a deal that AIG had arranged with General Re, a subsidiary of Berkshire Hathaway, Warren Buffett's company.
AIG has revised its earnings downward by $1.7 billion.
"These are very serious offenses, over a billion dollars of accounting frauds that AIG has already acknowledged," Spitzer said. "That company was a black box, run with an iron fist by a CEO who did not tell the public the truth. That is the problem."
Spitzer challenged comments last week by Greenberg’s lawyer David Boies that Greenberg had not broken the law.
"Well, obviously I disagree with that," Spitzer told George Stephanopoulos. "The evidence is overwhelming that these were transactions created for the purpose of deceiving the market. We call that fraud. It is deceptive. It is wrong. It is illegal," he added.
Spitzer said he hoped that he could reach a settlement with AIG, but he did not rule out issuing a criminal indictment against Greenberg.
When questioned if he was moving toward indictment against Greenberg, Spitzer said, "It depends what we will prove or can prove that Mr. Greenberg knew at the time. We have powerful evidence. We will proceed with it."
On Monday, legendary investor Warren Buffett, who is Chairman of Berkshire Hathaway, appeared as a witness at a meeting with regulators in New York, who are investigations transactions between AIG and Berkshire’s General Re unit, which were used to fraudulently boost AIG’s reported reserves
"We believe (Buffet) can shed light on a series of transactions that … Hank Greenberg participated in," Spitzer said in the interview with ABC.
Spitzer stressed that Buffet was "not a subject or a target of our investigation," but said, "There are some ambiguities that will be hopefully addressed (Monday) in our discussion with Mr. Buffett."
"He is a witness in our view, and the focus of this investigation is AIG and the much broader reach of the offshore entities that AIG has created that we believe were, in many respects, fraudulent," Spitzer said.
Last Friday, the New York Times reported that documents from a 2000 reinsurance transaction, which are the subject of the investigations, had been doctored several months after the deal was struck. The newspaper cited unnamed executives with direct knowledge of the transaction, who said the deal was "repapered" by midlevel employees of General Re.
