Maurice ``Hank'' Greenberg, former chief executive officer of American International Group Inc., may submit testimony that his successors' actions led to record losses that forced the insurer into an $85 billion U.S. bailout.
Greenberg, who ran AIG for 38 years before being ousted in 2005, is scheduled today to present a statement to the House Committee on Oversight and Government Reform in Washington. He'll miss the hearing because of illness, said his lawyer, Lee Wolosky. Martin Sullivan, a Greenberg protégé who was CEO for three years until June, and Robert Willumstad, an ex-Citigroup Inc. president who ran AIG until last month, are set to speak.
``Hank will say, `When I left AIG three years ago, it was doing very well,''' said Phillip Phan, professor of management at the Johns Hopkins Carey Business School in Baltimore. ``He's far enough from AIG that he can claim deniability.''
AIG, weakened by three quarterly losses of more than $18 billion tied to the housing slump and downgrades of its credit ratings, agreed Sept. 16 to a federal takeover that gives the U.S. a 79.9 percent stake in the New York-based firm. New CEO Edward Liddy, appointed by the government, has tapped $61 billion of the credit line and must sell businesses to repay the loan.
Willumstad declined to comment, said his spokeswoman Dawn Dover. Sullivan, who told investors in December that losses from writedowns tied to the housing market were ``manageable,'' didn't return messages left at his home.
Greenberg's Position
Greenberg, 83, has openly criticized AIG management in lawsuits, regulatory filings and public appearances. He told PBS's Charlie Rose last month that AIG, once the world's largest insurer, ``never would have gotten'' so involved in risky mortgage bets had he been in charge.
The Congressional committee, chaired by California Democrat Henry Waxman, is looking into who should be held accountable for the ``financial excesses that led to the market breakdowns,'' according to the committee's Web site.
Lawmakers lashed out at Lehman Brothers Holdings Inc. CEO Richard Fuld yesterday, peppering him for two hours with queries about excessive Wall Street pay and his failure to acknowledge the firm's financial woes until it was too late.
Lehman filed for bankruptcy Sept. 15, the same day the survival of 89-year-old AIG fell into doubt when Standard & Poor's and Moody's Investors Service cut the insurer's credit ratings. The reductions threatened to compel AIG to post more than $13 billion in collateral to fixed-income investors who purchased protection against losses through credit-default swaps issued by AIG.
Shares Plunge
AIG couldn't raise enough money after the stock plunged to less than $5 a share from more than $70 in October of last year. The insurer had raised more than $20 billion in May selling debt and equity, diluting the stakes of long-time investors.
AIG faces probes from the U.S. Securities and Exchange Commission and the Justice Department into the way the firm valued credit-default swaps. After Sullivan downplayed the potential for losses, the company said Feb. 11 its auditor found a ``material weakness'' in its accounting for the holdings. The insurer has also been sued by investors.
Liddy plans to sell life insurance operations in the U.S., Europe, Latin America, South Asia and Japan while maintaining most of its units that sell property-casualty commercial coverage. He also may sell AIG's plane-leasing unit, consumer finance division, U.S. auto insurer, a reinsurance business and an asset manager.
Liddy's Experience
Liddy, who helped oversee the spinoffs of Allstate Corp., Discover Financial Services, real estate broker Coldwell Banker Corp. and securities brokerage Dean Witter when he was at retailer Sears Roebuck & Co., said he wants to repay the federal loan before the two-year deadline.
Greenberg, who controlled the largest stake of AIG shares before the government takeover through personal holdings and investment firms, has said he may be interested in buying assets from the insurer. Greenberg cut the stake to just below 10 percent of the common shares last month, a reduction that may lead to less scrutiny from the New York Insurance Department.
Greenberg was forced to retire in March 2005 amid state and federal probes into the company's accounting and sales practices. He denies any wrongdoing in the case, which is still pending. Then-New York Attorney General Eliot Spitzer dropped portions of the lawsuit in 2006 that included four other allegations tied to the investigation.
The probes led to a $3.4 billion restatement of profits for a five-year period beginning in 2000. The company agreed to pay $1.64 billion to settle claims by Spitzer and the Securities and Exchange Commission that it misled investors.
New York Probe
Andrew Cuomo took over the case against Greenberg when he became attorney general in 2007. Greenberg gave testimony in the case last month.
In a separate civil suit, Greenberg and three other former AIG executives last month agreed to a $115 million settlement of claims that the insurer overpaid a company he controlled by $1 billion.
Greenberg's company, C.V. Starr & Co., gave the men bonuses based on fees from AIG, according to a lawsuit by a Louisiana pension fund.
