Former CEO Greenberg Transferred $2 Billion in AIG Shares to Wife Just Days Before Quitting Insurer

By | April 14, 2005

Three days before he resigned as head of American International Group Inc., Maurice ‘”Hank” Greenberg gave his wife 41.4 million of his shares in the insurance company, according to a regulatory filing.

The disclosure came on Tuesday, the same day Greenberg declined to answer questions posed by government investigators probing transactions at AIG.

AIG’s board forced Greenberg, 79, to relinquish his posts as president and CEO on March 14, and he retired as the company’s chairman two weeks later. Greenberg transferred the shares to his wife, Corinne P. Greenberg, on March 11, according to his filing Tuesday with the Securities and Exchange Commission. The shares are worth $2.2 billion, based on AIG’s current stock price.

Greenberg directly held 1.95 million shares after the transfer. In the filing, Greenberg also disclaimed ownership “and any pecuniary interest” in another 23.65 million AIG shares he held through C.V. Starr & Co. Inc., which controls AIG managers’ compensation.

Howard Opinsky, a spokesman for Greenberg’s legal team, declined to comment on the filing, as did AIG spokesman Chris Winans.

At Tuesday’s deposition, Greenberg invoked his Fifth Amendment rights against self-incrimination in response to all questions during the 45 minute session, according to a person who attended the meeting but asked not to be identified by name.

“I’m told it was quiet, cordial and professional,” Opinsky said after the meeting.

Greenberg, who arrived and exited the building via an underground tunnel, made no comments after the meeting. His lawyer had indicated on Monday that his client likely would refuse to answer questions because he had not had sufficient time to prepare.

Greenberg’s substantial stock gift to his wife is sure to spark investigators’ interest, because it appears to be an effort to shield assets, said Thomas Ajamie, a securities lawyer in Houston.

“All the alarms are going off, and red flags are waving, when he makes such a huge transfer at the exact same time that he’s under civil lawsuit scrutiny and criminal scrutiny,” Ajamie said. “This large of a transfer, even in isolation, would garner regulatory scrutiny, but in the context of the criminal and civil issues, the warning bells are waking up people from here to China.”

Investigators who attended the Tuesday session with Greenberg in New York Attorney General Eliot Spitzer’s office in lower Manhattan included members of Spitzer’s staff, representatives from the Securities and Exchange Commission and lawyers from the New York state insurance department.

The investigators are looking into a number of reinsurance transactions booked by New York-based AIG, one of the world’s largest insurers. Reinsurance traditionally has been used to spread out risk among insurers but, in some cases, has been used for the questionable purpose of polishing a company’s financial statements.

In the transaction at the center of the probe, AIG purchased reinsurance from General Reinsurance Corp. in the fourth quarter of 2000 and first quarter of 2001. Investigators have said that AIG used the deals to pump up its reserves when markets were uneasy about the company’s outstanding liabilities.

AIG acknowledged recently that its accounting for the transaction with Gen Re “was improper and, in light of the lack of evidence of risk transfer, these transactions should not have been recorded as insurance.”

Billionaire investor Warren Buffett, whose holding company Berkshire Hathaway Inc. owns Gen Re, spoke with the investigators on Monday. The investigators indicated that Buffett was a “cooperating witness” while Greenberg was subpoenaed as a target in the probe.

Before Tuesday’s session began, Joseph Fritsch, director of insurance accounting policy in the New York state insurance department, told reporters that investigators “have 40 pages of questions” for Greenberg.

He said that other AIG executives would likely be called for questioning, and that new information from them could result in a fresh subpoena for Greenberg.

Fritsch also said that Buffett a day earlier confirmed “that Hank knew about the deal” between AIG and Gen Re and that Greenberg had told a former Gen Re executive that he was disturbed about repeated questioning from Wall Street analysts over the level of AIG’s reserves.

Fritsch quoted Buffett as saying he did not give prior approval to the transaction, leaving the decision-making to his subordinates.

In a column in the Wall Street Journal, Greenberg’s lawyer, David Boies, said Greenberg had asked to postpone the questioning to allow for more time to review the documents in the case, and to limit questions to the General Re transaction. Both requests were denied, Boies said.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Was this article valuable?

Here are more articles you may enjoy.