Former American International Group Chief Executive Officer Maurice "Hank" Greenberg and other former AIG executives are responsible for $29.5 million as part of a $115 million settlement with an institutional investor over allegations that AIG diverted business to a company subsidiary, depriving shareholders of the benefits of those earnings.

An attorney for Mr. Greenberg, Lee Wolosky, said that "to avoid the costs and uncertainties of trial C.V. Starr & Company Inc. will pay approximately 28 million which is a tiny fraction of the $1 billion to $2 billion plaintiff's sought.

A spokesperson said the settlement monies would be provided by C.V. Starr not Mr. Greenberg.

The law firm Grant & Eisenhofer, representing the Teachers' Retirement System of Louisiana, brought the case as a class action in 2002 in Delaware.

Their complaint alleged that Mr. Greenberg, along with other executives and directors with American International Group, "breached their fiduciary duties by directing insurance business worth hundreds of millions of dollars in commissions to C.V. Starr."

The company did this despite the fact that New York-based AIG was fully capable of generating the business for itself and had been doing so, it was charged.

The settlement came six years after the litigation was filed and just days before the start of trial, Grant & Eisenhofer said.

In addition to paying costs for Mr. Greenberg, Starr will also make payments on behalf of AIG's former chief financial officer, Howard Smith; former vice chairman of investments, Edward Matthews; and former vice chairman of insurance, Thomas Tizzio. All four were executives with C.V. Starr & Co., a privately held AIG affiliate controlled by Mr. Greenberg and other AIG executives.

Mr. Greenberg left his position as AIG CEO and chairman in 2005 after the company was accused of improper moves to inflate its financial picture, but he remains the head of C.V. Starr. The company settled the case with New York State, but Mr. Greenberg remains a defendant facing civil fraud charges.

Under the settlement with the shareholder case, while Mr. Greenberg and the other executives will be responsible for payment of $29.5 million, the remaining $85.5 million will be paid by AIG's directors and officers liability insurance.

"This is a hugely important settlement for shareholders, one that not only returns some of C.V. Starr's ill-gotten profits to AIG shareholders but also advances critical corporate governance goals," Stuart Grant, managing partner at Grant & Eisenhofer, said in a statement.

AIG said only that they are pleased the matter has been resolved.

This article updated 12:44 p.m.

Special Reports /

C.V Starr To Pay $30M In AIG Shareholder Settlement

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