washingtonpost.com  > Business > Industries > Insurance

Greenberg to Resign as AIG Chairman

Company, Ex-CEO Under Pressure From Multiple Investigations

By Carrie Johnson
Washington Post Staff Writer
Tuesday, March 29, 2005; Page E01

Longtime insurance industry heavyweight Maurice R. "Hank" Greenberg said in a letter from his lawyer that he will step aside as chairman of American International Group Inc. as multiple investigations of the company and its accounting practices intensify.

Greenberg, 79, resigned as chief executive of the New York insurance giant less than two weeks ago after the New York attorney general, the Securities and Exchange Commission, and the Justice Department expressed fresh interest in AIG's dealings and Greenberg's role in a 2000 transaction that helped burnish the company's finances.

Maurice R. "Hank" Greenberg stepped down as chief executive of AIG less than two weeks ago. (File Photo)

AIG Chief Greenberg Retires in Shake-Up (The Washington Post, Mar 15, 2005)
AIG Tentatively Settles With SEC, Justice Dept. (The Washington Post, Nov 24, 2004)
_____Interactive Primer_____
Understanding Regulatory Policy
_____Related SEC Articles_____
McMillen Brings Big Names To New Venture (The Washington Post, Mar 28, 2005)
RECENT DEALS (The Washington Post, Mar 28, 2005)
Fidelity Trader Becomes 5th to Leave During Inquiry (The Washington Post, Mar 26, 2005)
More SEC News

Pressure on Greenberg, who has led the company for more than 35 years, heightened as a scheduled April 12 interview with investigators drew near. Legal experts questioned whether Greenberg would speak freely or decline to talk because he might incriminate himself. Independent board members at AIG have carried on a series of talks over the past several days about Greenberg's role, hiring the New York law firm Simpson Thacher & Bartlett LLP to provide legal advice and meet with regulators.

Companies receive credit for cooperating with investigators and for severing ties with employees implicated in wrongdoing when the government makes decisions about whether to bring criminal or civil charges against business entities, under longtime SEC and Justice Department policy.

A statement released by the company last night said Greenberg, who is traveling overseas, is expected to formally retire later this week. Frank G. Zarb, the lead director at AIG and former chairman of the National Association of Securities Dealers, will assume the duties of chairman, according to the statement.

In a letter to the lawyer representing AIG's board, Greenberg's lawyer David Boies said his client "recognizes the need to promptly and cooperatively resolve all inquiries and investigations by regulators."

New York Attorney General Eliot L. Spitzer yesterday praised the company's board for moving swiftly to address problems uncovered by the multifaceted investigation.

"While there is a long way to go before this investigation is complete, the wise actions of the AIG board will help get this investigation on a path towards resolution," Spitzer said in a statement.

Mark K. Schonfeld, director of the SEC's Northeast office, declined to comment.

Word of Greenberg's departure as chairman came as lawyers conducting an internal investigation briefed a group of regulators on several questionable transactions AIG had employed in the past several years.

The deals often took the form of finite insurance, or policies that insurance companies purchase to insulate themselves from outside claims. Regulators are particularly interested in deals in which companies take on little risk that might otherwise be classified as loans for accounting purposes. The policies can be used to smooth earnings, hide losses or more broadly misrepresent a company's financial statements.

Securities regulators began probing the use of such policies in recent months, an inquiry that rapidly picked up steam as Spitzer and SEC investigators handed out subpoenas and amassed e-mails and other evidence that implicated Greenberg and other AIG executives at the center of the deals, according to sources familiar with the probes.

Last week AIG fired finance chief Howard I. Smith and reinsurance vice president Christian M. Milton after they violated the company's cooperation policy and asserted their Fifth Amendment right against self-incrimination. AIG's stock price has plummeted by more than 20 percent since the company disclosed receiving subpoenas earlier this year.

The inquiry has sent ripples across the insurance industry, from offshore insurers in Bermuda to companies with clean reputations, such as Warren E. Buffett's Omaha-based Berkshire Hathaway Inc., which owns General Re Corp. Buffett is a longtime board member of The Washington Post Co. Investigators are not probing Buffett's conduct, but they are examining the dealings of other current and former Gen Re employees with AIG leaders, the sources said.

Gen Re is cooperating with regulators and providing details on a late 2000 deal with AIG that allowed AIG to boost its insurance reserves.

Meanwhile, AIG continues to work to meet a Thursday deadline for filing its 2004 annual report with the SEC. Company officials have said they hope to issue the filing, which will include details about the transactions under scrutiny, by Thursday.

© 2005 The Washington Post Company