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WILMINGTON, Del.American International Group Inc. has taken over a lawsuit by company shareholders seeking more than $1 billion in damages from former Chairman and Chief Executive Officer Maurice R. Greenberg and former Chief Financial Officer Howard I. Smith, for losses to AIG caused by their alleged wrongdoing.
The suit against Messrs. Greenberg and Smith stems from a series of shareholder derivative actions beginning in October 2004, following then-New York Attorney General Eliot Spitzer's bid-rigging suit against Marsh & McLennan Cos. Inc., which cited AIG and other insurers as participating in the alleged wrongdoing. MMC and AIG have both settled related charges.
The shareholder suit was later amended to include other alleged wrongdoing under the former executives' watch, such as charges related to financial restatements of earnings and finite reinsurance-related probes, among other things.
Following a review by a special litigation committee, New York-based AIG decided to pursue the case. On Wednesday, the insurer filed an amended complaint in Delaware Chancery Court to become the sole plaintiff. The committee "determined that it would be in the best interests of AIG and its shareholders for AIG to pursue these claims...rather than have them controlled by the plaintiffs bar," AIG said in a statement.
"Greenberg's and Smith's misconduct and wrongdoing...have had, and will continue to have, a series of deleterious effects on AIG," the suit says.
The duo failed to fulfill their fiduciary obligations to AIG, the suit says, and as a result the company was forced to spend hundreds of millions of dollars to undertake an expensive internal investigation into the company's accounting; restate financial statements for several years; and to pay related legal fees for regulatory investigations and class action lawsuits against the company.
A spokeswoman for Mr. Greenberg declined to comment on AIG's amended complaint.
AIG seeks indemnification from Messrs. Greenberg and Smith in connection with claims "asserted against AIG by virtue of Greenberg's and Smith's misconduct and wrongdoing," and an award of damages "in excess of $1 billion," the suit says.
In a separate motion Wednesday in Delaware Chancery Court, Vice Chancellor Leo Strine ruled that current AIG CEO Martin J. Sullivan cannot be sued by Mr. Greenberg in a complex dispute related to AIG's former relationship with C.V. Starr & Co., media reports said.
Mr. Greenberg's cross-claim stemmed from a 2002 shareholder derivative suit filed by the Teachers Retirement System of Louisiana, which charged that AIG officials improperly benefited from millions of dollars of commissions paid to entities controlled by Mr. Greenberg through C.V. Starr.
C.V. Starr, a former affiliate of AIG that produced business for the New York-based insurer for years, separated from AIG in the wake of Mr. Greenberg's departure.
Mr. Greenberg and two other former AIG executives who are defendants in the case argued that current CEO Mr. Sullivan and other AIG executives were more instrumental in determining Starr's commissions and were more to blame for the alleged wrongdoing, wire reports said.
The ruling Wednesday by Vice Chancellor Strine denied Mr. Greenberg's motion to countersue Mr. Sullivan, the reports said.
However, the ruling granted C.V. Starr the right to seek possible contributions from AIG for any damages awarded to the plaintiffs.