In 1970 Maurice Greenberg, the former head of American International Group, and other executives cheated a charitable foundation created by the founder of AIG out of millions of dollars to enrich themselves, New York Attorney General Eliot Spitzer charged yesterday.
Mr. Spitzer's accusations were made in a report on "Breaches of Fiduciary Duty by The Executors of The Estate of Cornelius Vander Starr." The report is part of Mr. Spitzer's lawsuit against Mr. Greenberg, who was forced out as AIG chief executive officer and chairman in March.
As a result of his findings, Mr. Spitzer wrote Florence Davis, the president of the Starr Foundation in New York, urging her to consider reconstituting the organization, which has Mr. Greenberg as chairman, as well as seeking recovery of assets.
Ms. Davis did not immediately return a request for comment from National Underwriter. The foundation, which provides grants for a variety of enterprises including education, medicine, healthcare, the environment and human needs, has assets of more than $3.5 billion.
Mr. Greenberg's legal team spokesman, Howard Opinsky, also did not respond to a request for comment.
According to the report, when Mr. Starr died in 1968, Mr. Greenberg and other executives named executors of the estate sold off stock assets "for a small fraction of their value" to companies they controlled, C.V. Starr & Co. Inc. (CVSCO) and Starr International Company Inc. (SICO).
Mr. Greenberg, the report noted, was and is a major CVSCO and SICO shareholder and runs both companies, which hold AIG stock worth over $23 billion.
The report said that the Mr. Greenberg and the other executors sold off stock the foundation held in a company called Far East, that they knew was worth $7.2 million for $1 million.
In portion of the report it states that the foundation received $1.08 million for CVSCO shares worth $5 million and if the transaction had been handled properly the foundation would have $750 million in assets today from the deal instead of $19 million.
Another transaction involving SICO stock also deprived the foundation, the report said.
"In sum, the executors sold the estate's holdings in Far East, CVSCO and SICO for a total of approximately $2 million at a time the executors knew that they themselves could obtain over $30 million in stock for those same holdings from AIG. If the estate had received that stock, it would now be worth more than $6 billion," the report said.
Although Mr. Spitzer has detailed accounting activities at AIG involving Mr. Greenberg–which his suit has labeled fraud–his office has said they do not intend to proceed against him criminally.
In the past, when questioned by state and federal investigators, Mr. Greenberg has not answered, invoking his Fifth Amendment right against self incrimination.
He has also issued statements vigorously denying any impropriety and challenging AIG's admissions that some accounting activity was "improper."
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