A Dubious Smack for Hank Greenberg

Posted by: Diane Brady on May 21, 2008

He has battled Eliot Spitzer and AIG. Now, Hank Greenberg faces another potential foe: the U.S. Securities and Exchange Commission. The former AIG chief has received a “Wells notice”, which gives recipients a warning that civil charges may be forthcoming from the SEC. The charges, of course, stem from the financial transactions that resulted in his ouster and heavy fines for the company about three years ago.

You can almost hear the sighs coming from Greenberg’s new headquarters on Manhattan’s Park Avenue. There’s nothing the 83-year-old executive would like more than to restore his reputation and discredit those who took him away from his beloved AIG.

Greenberg has enjoyed somewhat of a renaissance lately. People seek out his views on everything from insurance trends to China’s leadership. They pine for the days when he was at the helm of the financial services giant, racking up double-digit earnings gains amid a steady ascent in the stock. Many thought Spitzer was mean-spirited in orchestrating his ouster, even joining Greenberg in raising a virtual glass when the man stepped down as New York governor after consorting with prostitutes.

And now this. Greenberg has denied again that he did anything improper when it came to presenting AIG’s financial picture. He will fight this, as he fought Spitzer.

With the SEC already so stretched, you have to wonder if this is a good use of its resources. Greenberg has been kicked out of AIG and publicly humiliated. Executives at the company he built seem hesitant to even mention his name. Now, more than three years after the alleged improprieties that ripped apart the company and its former chief (as well as several other executives), the SEC is here to wield its bat as well? Enough, already.

Reader Comments

Jake Zamansky

May 21, 2008 2:45 PM

Kudos Diane for your insight. Going after Hank Greenberg amounts to the proverbial beating of a dead horse and is an egregious waste of limited SEC resources, particularly given that he’s already been ousted from AIG.

Sadly, the SEC’s prosecution of Greenberg underscores its reluctance and failure to pursue systemic wrongdoing at the major Wall Street firms. A case in point is the love tap the SEC imposed on more than a dozen Wall Street firms when the agency discovered they were rigging the auction rate securities market. (see SEC press release here). As countless investors are now painfully aware, the paltry SEC fine did nothing to curb the widespread wrongdoing, which is a reason why the market ultimately failed.

It’s also quite possible that the SEC could have prevented the collapse of Bear Stearns. The collapse of Bear’s subprime hedge funds revealed serious weaknesses in the firm’s finances and business practices, but the agency chose to remain on the sidelines until after Bear collapsed.

Finally, the credit defaults swaps market has been transformed into a trillion dollar market that is essentially unregulated despite the fact that its collapse could spark a major global crisis.

BusinessWeek has been on the media forefront exposing hedge fund greed and abuse. The magazine would further serve its readers well to explain how the SEC repeatedly has failed to fulfill its mandate to protect individual investors who ultimately bear the brunt of Wall Street’s incessant wrongdoing.

williambanzai7

May 24, 2008 2:40 AM

Its taken them this long to decide that they want to go after Greenberg. Why don't they take a look at the misleading statements made by current management last December. The same people who are in the market raising $20 Billion? The idea that people in the FSI can make aggressive statements and then escape culpability by blaming everything on challenging market conditions is a farce. Oh well, when is the last time the SEC shook anything up?

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