By Carol D. Leonnig
Washington Post Staff Writer
Wednesday, October 1, 2008
In the four decades that Maurice R. "Hank" Greenberg was at the helm of American International Group, he persuaded Washington to back him on many deals that helped his insurance company beat competitors and ultimately grow into the 18th-largest corporation in the world.
Greenberg makes no apologies for personally dialing lawmakers and senior White House officials to try to protect AIG's interests, especially when he sought to break into untapped foreign markets. In a rare interview since the company he built imploded and received an $85 billion government bailout, he said that knowing Washington was a critical part of his job as he expanded AIG to operate with $1 trillion in assets and in 130 countries.
"I think a CEO should be directly involved," said Greenberg, who was ousted as chairman in early 2005 but remains a force by owning and controlling the largest single chunk of the company's stock. "When you're growing a company and trying to get into other markets . . . what do you think a CEO should do? Go to the movies?"
Greenberg was the architect of AIG's muscular Washington lobbying effort, which spent $72 million in the past 10 years and led the corporation to be ranked as one of the top 30 lobbying powers in recent history. Aided by the $7 million that the company and its executives poured into presidential and congressional campaigns and the $25 million that Greenberg's charitable foundation gave to powerful anti-regulation trade groups, AIG's clout in Washington soared.
"AIG was the ultimate insider corporation that had a revolving door with Washington, and could grab the attention of any policymaker with the money they spread around Capitol Hill," said Richard Ferlauto, director of corporate governance and pension investment at the American Federation of State, County and Municipal Employees. "It's an incredible amount of money they've used to push back against regulations that were designed to protect the American consumer."
Earlier this month, AIG came close to death after guaranteeing billions of dollars worth of banks' and financiers' mortgage-backed investments that proved toxic. With more mortgages failing and AIG facing mounting claims, it did not have enough cash on hand.
Some question whether AIG's power played a role in the Treasury's decision to bail out the company and let others fail. But many financial analysts argue that the rescue was essential because AIG's failure would have weakened or bankrupted so many other investment houses left holding the worthless mortgage investments, including Goldman Sachs.
If AIG bounces back, a rise in its stock value would restore some money to Greenberg, who lost millions in the firm's fall. And as the 84-year-old positioned himself last week to buy parts of AIG that are put up for sale to pay the mortgage claims, his legendary pull in Washington may prove useful once again in AIG's revival.
"They have long played this game like experts, and it's certain that their pull on the political front plays a role in their access to support now," said Sheila Krumholz, executive director of the Center for Responsive Politics. "AIG's goodwill is legendary."
AIG's clout came in large part from Greenberg's commanding persona. Wall Street called the hands-on chairman a genius, and at least four presidents sought his advice on international affairs and financial markets. For years, he ranked among the 150 richest people in the world. When he sought help from lawmakers and administration officials, they returned his calls -- and generally quickly.
"What I've found is . . . the people you want to see don't want to talk to someone lower down in the hierarchy," Greenberg said. "They don't want to talk to your minions. They want to talk to the boss."
Greenberg backed up his own influence with a board of directors that included members with deep ties to their respective political parties. Among them were President Bill Clinton's defense secretary William S. Cohen and former U.N. ambassador Richard Holbrooke. On the Republican side, there was Carla Hills, who had been U.S. trade representative under President George H.W. Bush, and whose husband had been chairman of the Securities and Exchange Commission.
"They relied on Washington clout rather than on sound financial oversight from a good board," Ferlauto said.
The company also lavished political contributions on candidates from both parties.
Greenberg himself was a major Republican donor, serving as a Pioneer and then a Ranger fundraiser for President Bush's two campaigns. AIG was also a top donor to Sen. John McCain's presidential run in 2000. At an insurance conference in Florida last spring, participants said, Greenberg told industry members that Republican nominee McCain was the best choice for the White House.
AIG executives and employees gave Democrats 46 percent of their campaign contributions since 1998. Sen. Christopher J. Dodd (Conn.), chairman of the Senate banking committee, racked up the most donations, $281,400, while Sen. Charles E. Schumer (N.Y.), a member of both the Senate banking and finance committees, took in $116,400 .
The connections worked well when AIG needed special help, as it did in the days before and after the Sept. 11, 2001, attacks.
Before the attacks, Greenberg had been working the phones to Washington and Geneva, consulting with U.S. Trade Representative Robert B. Zoellick's staff and the Chinese about how to ensure AIG could continue to open and control its own insurance branches in China. The country's entry into the World Trade Organization had been temporarily held up by a standoff between AIG's claim of special status and European Union objections. China formally joined the international trading group on Sept. 15, after U.S. negotiators won a concession allowing AIG to open more branches.
Ten days after the attacks, Greenberg led a group of insurance executives into a meeting with Schumer, where they pressed for taxpayers' money to cover terrorism-related losses. At the same session, Greenberg sought -- and later won -- Schumer's backing for a legislative amendment that provided war-risk insurance not just to airlines, but to companies such as AIG that leased planes to airlines. A Transportation Department lawyer inserted a handwritten amendment, covering leasing companies, into the war-risk bill shortly before its passage.
Greenberg also put his money into opposing regulation. The largest recipient of the $25 million his Starr Foundation gave to trade groups was a foundation with ties to the U.S. Chamber of Commerce, whose leaders publicly supported Greenberg when he and AIG were under investigation for alleged accounting fraud and bid-rigging by federal and New York authorities in the early 2000s.
The Starr Foundation also gave $500,000 to support a November 2006 report by the Committee on Capital Markets Regulation, its authors said. The report called for a widespread overhaul of financial rules, more rigorous oversight of the enforcement unit of the Securities and Exchange Commission and fewer criminal prosecutions of businesses.
Long after his ouster, Greenberg remained a person to call on for lawmakers needing help with pet projects. Rep. Charles B. Rangel (D-N.Y.), chairman of the House Ways and Means Committee, sought a donation from Greenberg for the new Charles B. Rangel Center for Public Service at the City College of New York. Eventually, the Starr Foundation donated $5 million to the center.
AIG also became a VIP donor to a McCain think tank, giving an amount "over $50,000" to the Reform Institute, a group McCain founded in 2001 to promote campaign fundraising reform.
Staff writers Christopher Lee and Carrie Johnson, staff researcher Julie Tate and database editor Sarah Cohen contributed to this report.