AIG Ex-Chief Hank Greenberg Sounds Off

In an interview with BusinessWeek, Greenberg—still AIG's top shareholder—says the insurer is overstaffed and overspends on directors and lawyers

by Peter Coy

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The multibillion-dollar battle of Maurice "Hank" Greenberg vs. insurer AIG took another soap-operatic turn May 2.

In a meeting with editors of BusinessWeek that was sought by Greenberg's public-relations handlers, the famously tough, 82-year-old executive launched a new line of attack on the management of American International Group (AIG). That's the New York-based insurance giant that Greenberg built—and from which he was deposed in 2005 after an accounting scandal.

Greenberg claimed that AIG is overstaffed, pays its directors too much, is wasting money on lawyers, and is making false claims about its historical origins. Asked for reaction, AIG spokesman Chris Winans denied Greenberg's assertions and added, "We're not interested in litigating this in the press."

Earnings Coming Up

Greenberg may be critical of AIG, but he remains a multibillionaire based on being the insurer's largest shareholder. Both Greenberg and AIG management are positioning themselves for AIG's announcement of its first-quarter earnings, scheduled for May 8, and the annual shareholders' meeting in New York, scheduled for May 14. Analysts are expecting another weak quarter for AIG, which lost $5 billion in the last quarter of 2007 because of an $11 billion writedown of its credit default swap portfolio. It was the company's largest loss since it went public about 40 years ago.

The dispute between AIG and Greenberg is highly personal—and highly expensive, with both sides heavily lawyered up. Sitting to Greenberg's right during his May 2 visit to BusinessWeek was David Boies, the superlawyer who prosecuted the antitrust case against Microsoft (MSFT) and represented Al Gore in the Supreme Court case over the disputed 2000 Presidential election.

In addition to reputations, big money is at stake. In March, AIG sued Greenberg and six other former executives of AIG in New York state court, claiming that after they left in 2005 they illegally seized control of Starr International, a company related to AIG that holds AIG shares then worth $20 billion. Greenberg says there was nothing illegal about how his group pushed AIG execs off the Starr International board.

Questioning AIG's Origins

Although Greenberg is known to show flashes of anger, he was calm in his May 2 visit to BusinessWeek. He presented himself as a shareholder who simply wants to know whether management is protecting his investment. AIG shares dipped as low as 40 in mid-March before snapping back to 49 on May 2, but they are still well below their 52-week high of 73.

But when BusinessWeek looked into Greenberg's criticisms, at least one seemed invalid. Greenberg argued that AIG has been inaccurately claiming that AIG was started in 1919. In fact, he says, it was C.V. Starr, an ancestor of Starr International, that was started in 1919, whereas AIG is a completely separate operation that dates back only to 1967. (This distinction matters because it helps Greenberg make his case that Starr is independent of AIG and doesn't have to give AIG its shares in the company.)

The trouble for Greenberg is that he's been on the record himself mixing up the origins of Starr and AIG. For example, in 2003 he testified, "American International Group Inc. (AIG) has a unique history. We were founded by an American entrepreneur in 1919 in Shanghai, China." The 2003 annual report of AIG likewise mentions "our beginnings in Shanghai in 1919" without any reference to Starr.