Ex-CEO Greenberg Sues AIG, Alleges Securities Fraud
Greenberg, the insurer’s largest individual shareholder, accused AIG of overstating its financial health and masking losses on credit default swaps that hedged default risk for at least $527 billion of debt.
He said AIG’s “material misrepresentations and omissions” had caused him to acquire shares as part of various deferred compensation plans at an inflated price, and later to lose nearly his entire investment after AIG’s losses became known.
AIG shares closed at $54.37 on Jan. 30, 2008, the date that Greenberg said he acquired AIG shares through the deferred compensation plans.
The shares closed Monday at 42 cents after news of the fourth-quarter loss and yet another government rescue deal.
Greenberg is seeking the difference between what he paid for the shares and what he said the shares were worth, as well as reimbursement of more than $70 million of taxes.
The lawsuit also named several individuals as defendants, including Greenberg’s successor Martin Sullivan and Joseph Cassano, the former chief of AIG’s financial products unit, which originated many of the credit default swaps.
AIG spokeswoman Christina Pretto said the lawsuit was without merit, and that the insurer would defend itself vigorously. Sullivan and Cassano did not immediately return calls to their homes seeking comment.
Greenberg ran AIG for nearly four decades before being ousted in March 2005, when New York Attorney General Eliot Spitzer was investigating transactions involving the insurer.
AIG’s quarterly loss led to a loss of $99.29 billion for the year, largely stemming from writedowns related to credit default swaps, mortgage securities and other toxic debt.
The problems resulted in a new government bailout for AIG, which will get access to as much as $30 billion of new capital. The government had already given AIG $150 billion as part of a rescue last year, and took a nearly 80 percent equity stake.
(Editing by Jeffrey Benkoe and Ted Kerr)