A long business soap opera ends: AIG and Greenberg settle
Nov 26th 2009 7:45AM
Updated Dec 3rd 2009 1:43PM
Maurice R. "Hank" Greenberg did not start AIG (AIG), but he might as well have. Greenberg took over as head of the insurance company in 1968, the only CEO other than its founder C.V. Starr. Greenberg turned AIG into the largest insurance firm in the world. In 2005 he left during an accounting scandal, then shortly after his departure, problems with toxic assets on the firm's balance sheet nearly took the company under. A series of government investments totaling $180 billion kept AIG in business. Washington was worried that a collapse of AIG would bankrupt a number of other large companies that had relationships with the firm.
On Nov. 25, AIG and Greenberg agreed to settle all of the outstanding legal issues between them. According to an 8-K filed with the SEC, Greenberg and AIG's former CFO will receive reimbursement of their legal fees of up to $150 million. AIG also dropped a $1 billion claim against Greenberg. Some of Greenberg's property, much of it from his old office, was returned to him. He will also have access to some AIG files "to write his memoirs."
The deal has the fingerprints of AIG's new CEO, Robert Benmosche, all over it. He was smart enough to understand that an ongoing fight with Greenberg was expensive, wasted AIG management resources, and hurt its image. The insurer needed to put the most troubling parts of its past behind it, in part to show investors, customers, and regulators that its only concern is to fix the firm and return taxpayers' money.
Why did the dispute go on for so long? That question may never be answered. It may have been the egos of the parties involved. It may have been some sense on the part of Benmosche's predecessors that it was important to punish Greenberg. No matter what the reason, it kept some of AIG's worst problems in the headlines, undermining any efforts to change the public's perception of the company.
Douglas A. McIntyre in an editor at 24.7 Wall St.