AIG Settlement Covers $60 Million of Ex-CEO, Ex-CFO Costs

August 30, 2010

Former longtime AIG chief Maurice “Hank” Greenberg and another former executive will get $60 million from the company’s insurers to cover legal and other costs as part of a proposed settlement of investor lawsuits, court papers show.

The payouts to Greenberg and former Chief Financial Officer Howard Smith are in addition to $90 million that American International Group Inc.’s insurers, as previously reported, will pay directly to the company as part of the proposed settlement.

The $150 million of payouts were revealed in an Aug. 25 agreement filed in Delaware Chancery Court, and obtained Friday by Reuters.

They stem from litigation in which investors accused more than 20 onetime AIG executives and directors of poor oversight and allowing improper bonuses. The Delaware lawsuit was filed by investors on behalf of AIG.

Greenberg left AIG in March 2005 after nearly four decades at the helm.

AIG in November 2009 said it had resolved all litigation with Greenberg, and agreed to reimburse him and Smith for as much as $150 million of legal fees and expenses, according to an agreement filed with U.S. regulators.

The $60 million payout by insurers is separate from that agreement, and Greenberg and Smith represented in the earlier agreement that no one else other than the insurers was obligated to indemnify them for the relevant costs.

AIG had $200 million of insurance for directors and officers, the Delaware agreement shows. None of the sums being paid go to investors, and Greenberg and Smith are also not responsible to pay out money in connection with the agreement.

In emailed statements, AIG said it was pleased the matter has been resolved, as did Lee Wolosky, a partner at Boies, Schiller & Flexner LLP who represents Greenberg.

A lawyer who signed the Aug. 25 agreement on behalf of Smith did not immediately return a call seeking comment.

The Delaware agreement requires approval of Vice Chancellor Leo Strine of the Delaware court. A settlement will be made final upon the dismissal of similar litigation in Manhattan federal court, the agreement shows.

Based in New York, AIG in September 2008 narrowly averted collapse after becoming overexposed to risky debt. It accepted a federal bailout that grew to $182.3 billion and left taxpayers owning a nearly 80 percent stake.

Six weeks ago, AIG agreed to pay $725 million to settle a shareholder class-action lawsuit led by Ohio Attorney General Richard Cordray, who accused it of accounting fraud and trying to manipulate its stock price.

AIG still faces shareholder class-action litigation in Manhattan federal court. Greenberg has sought to dismiss a civil fraud lawsuit by New York Attorney General Andrew Cuomo over a sham reinsurance transaction.

The case is In re: American International Group Inc Derivative Litigation, Delaware Chancery Court, No. CA 769.

(Reporting by Jonathan Stempel; Editing by Phil Berlowitz)

Was this article valuable?

Here are more articles you may enjoy.