Maurice Greenberg, ex-chairman of American International Group, responded to AIG's $1 billion fiduciary misconduct action against him with a countersuit yesterday saying the firm's directors and management made an "unjustifiable" $1.6 billion regulatory settlement.
Mr. Greenberg–who was forced out as AIG chairman and chief executive officer in March 2005–also charged that former and present management and the firm's auditors, PricewaterhouseCoopers, unnecessarily and improperly restated past company earnings.
The former CEO's filing in Delaware Chancery Court was the latest in a swirl of legal action to arise after an investigation by former New York Attorney General (now governor) Eliot Spitzer, which found the company was involved in a bid-rigging scheme as well as sham reinsurance transactions to improve its financial picture.
As a result of that probe, in addition to ousting Mr. Greenberg and Chief Financial Officer Howard Smith, the company issued a restatement that reduced AIG net income between 2000 and 2004 by a total of $3.92 billion and shareholder equity by $2.26 billion, according to filings by Mr. Greenberg.
Many of the accusations made in yesterday's countersuit were made last week by Mr. Greenberg in a motion filed in a New York State court in Manhattan, where he and Mr. Smith are defending themselves against a lawsuit for accounting fraud that was filed by Mr. Spitzer–which originally included AIG before the firm reached a settlement.
In a statement released by Mr. Greenberg's attorney, David Boies, the arguments in his countersuit were summed up as follows:
o There is no evidentiary basis for any of AIG's claims against Mr. Greenberg.
o The most important of AIG's allegations are old, recycled claims that have already been dismissed by the New York attorney general.
o The accounting decisions and other conduct [alleged sham reinsurance transactions, underpayments to state workers' comp funds and improper accounting] which AIG now attacks were known, recommended, and approved by AIG's current board and management–as well as by AIG's internal and external auditors, lawyers, and other advisors.
o AIG's May 2005 restatement was unnecessary and in important respects improper.
o The damage to AIG's reputation and financial standing, and the harm to AIG's shareholders caused by the restatement was the result not of any improper conduct by Mr. Greenberg, but of the determination by AIG's current board and management to justify their opposition to Mr. Greenberg and insulate themselves from liability.
The countersuit also said AIG's action ignored that under Mr. Greenberg's stewardship, "AIG grew from a small, struggling enterprise into the world's largest and most successful insurance company in history, with a market capitalization increase of an incredible 40,000 percent between 1969, when AIG became a public company, and 2004."
The suit added that "throughout this period, Mr. Greenberg–who never sold a single share of AIG stock while employed by the company, and who even AIG's board admits was under-compensated–always acted solely in what he believed to be the best interests of AIG and its shareholders."
Mr. Greenberg's statement accused the AIG board and management of taking legal action "to insulate themselves from liability and criticism, protect sweetheart contracts and compensation, and pursuing their personal disputes with Mr. Greenberg at the expense of the interests of AIG and its employees and shareholders."
The lawsuit names 16 current and former members of AIG's board of directors and management, including, among others, lead director and former interim chairman Frank Zarb, current AIG CEO Martin Sullivan, and current AIG Executive Vice President and CFO Steven J. Bensinger. The lawsuit also names outside advisors, such as PWC.
PricewaterhouseCoopers said in a statement that it is "disappointed that Mr. Greenberg has included PwC among the 18 parties he has named in his third-party complaint" and "PwC continues to stand by its professional judgments regarding AIG and believes Mr. Greenberg's claims lack merit."
Vincent A. Sama, counsel for Mr. Smith, AIG's former CFO: "Mr. Smith intends to respond promptly to AIG's amended complaint in the Delaware derivative litigation, and will assert appropriate claims against those individuals and entities involved in the transactions at issue."
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