Risk Management

Greenberg-led Company Sues AIG

Starr International reportedly alleges that the insurance giant mismanaged a $1.6 billion settlement with regulators last year.
Stephen TaubJune 21, 2006

A company controlled by former American International Group chairman and chief executive officer Maurice “Hank” Greenberg is taking AIG to court.

Starr International, which holds a 12 percent stake in the insurance giant, is seeking a court order to force AIG to turn over notes and minutes of board meetings since February 9, 2005, according to published accounts. Starr reportedly alleges that AIG mismanaged a $1.6 billion settlement with regulators last year.

The Wall Street Journal pointed out that the lawsuit invokes a Delaware law that allows shareholders to see corporate records if they suspect wrongdoing.

The Journal also noted that Greenberg, who was forced out in March 2005, faces a lawsuit by AIG seeking to recover millions of dollars in alleged improper payments.

Both AIG and Greenberg have been the subject of investigations by New York State Attorney General Elliot Spitzer and New York State Insurance Commissioner Howard Mills, who accuse them of manipulating the company’s financials in order to deceive regulators and investors.

According to The New York Post, Greenberg lawyer Ed Matthews described the potential for “possible mismanagement and improper transactions” linked to AIG’s payment to various state worker compensation funds and argued the that these alleged difficulties “may be indicative of other potential problems.”

A Greenberg spokesman told the paper that “given the reports of states questioning why they are receiving these funds, and the amount paid to certain states, it’s very troubling to see how hard AIG is trying to prevent us from examining the issue.” An AIG spokesman declined to comment.