Greenberg Accused Of 'Self-Dealing'
Thursday, December 15, 2005
NEW YORK, Dec. 14 -- Maurice R. "Hank" Greenberg ignored his mentor's will four decades ago and sold stocks left to a charitable foundation to two companies Greenberg controlled, in a series of "self-dealing" transactions that drained value from the charity and enriched the Greenberg-controlled companies, New York state Attorney General Eliot L. Spitzer said in a new report.
In all, assets that were sold more than 30 years ago for $2 million would be worth more than $6 billion had the charity, the Starr Foundation, continued to hold them, the Spitzer report said. The attorney general urged the group to consider legal means to recover the assets.
The report, delivered yesterday to the New York charity's leadership, is the latest salvo in a legal struggle between Spitzer and Greenberg, once one of the nation's most powerful business leaders. Greenberg, the longtime head of American International Group Inc., was forced out as chief executive in March after accusations of accounting and other improprieties.
The report is a particularly tough personal swipe at Greenberg in that it accuses him of breaching his fiduciary duties toward his friend and mentor, Cornelius Vander Starr, AIG's founder, who died in 1968.
In a written statement, Greenberg and the other three surviving executors denied the report's claims. "The allegations made against us by the attorney general and leaked to the media by him are outrageous and an insult to the executors of Mr. Starr's estate and the trustees of the Starr foundation," the statement said.
An AIG spokesman declined to comment.
The foundation was created by Starr shortly before his death to benefit medical research institutions, hospitals and cultural and environmental groups. It has assets of about $3.5 billion, mostly in the form of AIG shares, according to Spitzer's report.
Most of the charity's assets came from transactions unrelated to the deals described in the report, a spokesman for Spitzer said.
Starr, who in 1919 founded the companies that became AIG, was a noted philanthropist who left his entire estate to the foundation. The estate consisted of his stakes in three closely held insurance companies: C.V. Starr & Co., Starr International Co., and American International Reinsurance Co.
Before his death, Starr named Greenberg and other directors of C.V. Starr as his estate's executors. Greenberg, as C.V. Starr's president and Starr's "hand-picked successor," took a lead role in disposing of the estate's assets, Spitzer said.
Greenberg was an original director of the foundation and has been its chairman since 1981.
Spitzer's report claimed that the estate sold Starr's stakes for below-market prices back to the companies -- then controlled by Greenberg and others -- in return for cash. The stakes in those companies soared in value after they sold their assets in 1970 in return for shares in the newly created AIG, which became a public company in 1971.