I never expected Maurice Greenberg to give an inch when it came time to battle charges involving accounting fraud while he was heading up AIG. Yet not only did Hank settle with the Securities and Exchange Commission, he ended up having to do a little damage control after the SEC objected to his rhetorical shrug of the shoulders in characterizing the meaning of the deal to him personally.
In case you hadn't heard, Mr. G paid $15 million to settle charges stemming from the misuse of finite reinsurance at AIG to artificially boost the company's balance sheet–and, most likely, its stock price at the time.
That's the scandal that forced Hank from his iconic post as chair and CEO at American International Group, and which eventually resulted in the criminal conviction of four General Reinsurance officials–including former CEO Ron Ferguson and former CFO Elizabeth Monrad–as well as the former head of reinsurance at AIG, Christian Milton.
Given that Mr. Greenberg was named as an unindicted co-conspirator in that case, you might say he got off easy. After all, the $15 million he agreed to fork over was probably a lot less than he would have faced in legal bills alone had this case gone to trial.
And the deal with the SEC did not deny him the right to serve as an officer at a public company, which was the fate of another AIG official who settled simultaneously–Howard Smith, AIG's former vice chair and CFO. (Howard had to pay $1.5 million to make the SEC go away.)
But I think this turn of events had to hurt Hank–if not in his wallet, then in terms of his pride and reputation, especially so soon after prevailing in the civil suit over retirement and bonus funds filed by AIG against him.
Hank Greenberg is a fighter, and I cannot imagine he would ever agree to settle a case this big unless he was convinced he might likely face an even worse fate had he continued his battle in court.
That Hank tried to make light of the settlement, much to the SEC's chagrin, prompting him to do an about-face and issue clarifying remarks, indicates that the SEC had more to its case than he would like to admit, but not enough to assure a slam dunk in court.
When the settlement was first announced on Aug. 6, Mr. G sort of shrugged it off, emphasizing that he was merely acknowledging being a "control person"–literally the one in charge of AIG at the time of the scandal, which even he admitted was not much of a concession.
In his initial statement, Mr. Greenberg emphasized that he had personally never engaged in any fraud, had no direct responsibility for the accounting fraud committed on his watch, and that he continued to dispute the need for the substantial financial restatement AIG initiated after the fraud came to light.
The SEC, to put it mildly, did not agree. The agency issued a statement of its own, noting that the settlement "does not express any view that minimizes Mr. Greenberg's role in any of the transactions that have been the subject of restatement by AIG."
The SEC went on to say that "under governning law, the charge against Mr. Greenberg as a control person with respect to AIG's alleged securities fraud requires his culpable participation in the underlying [accounting] fraud."
Mr. Greenberg's new outfit–C.V. Starr–was then moved to issue a second, more contrite statement, noting that the size of his fine is "a reflection of the importance of the charge to the SEC, and Mr. Greenberg's willingness to make [that payment] is a reflection of his recognition of that importance."
The statement went on to say that Mr. Greenberg "recognizes the seriousness of a control person charge, and the significance with which the SEC treats it."
This nightmare is not quite over for Mr. Greenberg, who may yet face civil charges from New York Attorney General Andrew Cuomo, who inherited this long-lingering investigation from Eliot Spitzer.
The word on that case is that by month's end, we may have a ruling on a summary judgment motion–which might be more difficult for Mr. Greenberg to pull off now that he's settled with the SEC, even though he took great pains to point out he made no admission of guilt.
In other words, stay tuned!
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