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Last Updated: Dec 19th, 2007 - 13:17:15 |
In a dramatic illustration of the changing culture of governance in American boardrooms, insurance giant AIG on Monday ousted its legendary CEO Maurice “Hank” Greenberg, as chief executive. The departure came after regulators found evidence of his alleged involvement in a transaction that they believe was designed to inflate the insurer's financial figures. Greenberg will remain as non-executive Chairman and will be replaced by Co-Chief Operating Officer Martin Sullivan.
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| Maurice Greenberg (left) pictured with the AIG Board. In 2003, AIG had 50 million customers and $9.3 billion in net income. |
Bloomberg News says that Greenberg's resignation as CEO came as New York Attorney General Eliot Spitzer zeroed in on a specific reinsurance transaction between AIG and Warren Buffett's Berkshire Hathaway Inc.'s General Reinsurance subsidiary dating to 2001, according to a person familiar with the matter.
Spitzer obtained information in the past 10 to 14 days that Greenberg himself may have initiated the transaction to smooth AIG's own earnings, the person said, adding that officials from Spitzer's office confronted AIG last week.
AIG, which is headquartered in New York, is one of the top global property-casualty insurers and Maurice Greenberg, 79 who is known by his nickname ``Hank,'' is the doyen of the insurance industry. He joined AIG in 1960 and became President in 1967. AIG has grown into one of the world's leading financial-services groups with a market capitalization of $168.5 billion
Greenberg’s son Jeffrey W. Greenberg was forced to resign last October as Chairman and Chief Executive of the world’s top insurance brokerage Marsh & McLennan, following an investigation into bid rigging and bribery by New York Attorney General Eliot Spitzer. Marsh & McLennan in a settlement agreed to pay $850 million in restitution. Another son, Evan G. Greenberg, is President and Chief Executive Officer of Bermuda-based ACE Ltd. Both sons had worked at AIG but d eventually had enough of their father’s dictatorial style.
AIG was not directly implicated with the Marsh & McLennan case but four former AIG executives have entered guilty pleas to criminal charges arising from Spitzer’s investigation.
Last November, AIG agreed to pay $126 million to settle allegations of securities fraud by the SEC and the Justice Department related to three 2001 transactions it made with PNC Financial Services Group Inc. that allegedly helped the Pittsburgh-based banking company artificially inflate its earnings.
Under that settlement, AIG agreed that an independent monitor would examine its books to see if there are any other questionable deals. AIG, without admitting or denying guilt, also settled civil-fraud charges with the SEC and payed a $10 million fine.
In the latest investigation, AIG has been the focus of a probe by Spitzer, federal prosecutors and the SEC into the use of so-called finite insurance, or financial reinsurance, which critics say could be used to manipulate earnings. The transaction under investigation took place between AIG and Warren Buffett's Berkshire Hathaway subsidiary General Reinsurance unit four years ago and apparently was intended to shore up AIG's reserves.
