AIG lawsuits Part II: Greenberg strikes back

[WILMINGTON, Delaware]—Firing back at a $1 billion (€743.6 million) lawsuit filed against him by his former company, Maurice Greenberg last month sued 16 current and former American International Group Inc. directors and executives, the insurer's long-time auditor and an outside consultant.

The former AIG chairman and chief executive officer brought the suit just one week after AIG stepped in and took over a shareholder derivative suit that seeks more than $1 billion from Mr. Greenberg and former Chief Financial Officer Howard Smith for alleged wrongdoing and resulting losses to the company.

Mr. Greenberg's suit, filed in the form of a third-party complaint in Delaware Chancery Court, states that AIG's amended complaint is without merit and that he intends to fight the lawsuit. Messrs. Greenberg and Smith—now top executives at New York-based C.V. Starr & Co.-left AIG in March 2005.

Starr produced business for AIG for many years, but the companies' relationship has been contentious since Mr. Greenberg's departure from AIG.

In his suit, Mr. Greenberg denies allegations by the insurer that he was responsible for damage to AIG's reputation and financial standing, and argues that any harm to the company and shareholders was instead the result of decisions made by AIG's board and management—including the decision to restate company earnings and reach a $1.64 billion (€1.22 billion) settlement in February 2006 with then—New York Attorney General Eliot Spitzer and other officials.

Self interest

"The restatements were an extreme overreaction to governmental investigations and were designed to cast predecessor management in a negative light, and to set an artificially low threshold for evaluating the future performance of AIG under the new management," Mr. Greenberg's lawsuit states.

"The third-party defendants were motivated to issue the restatements by their own self-interest, not the interests of the shareholders of AIG, including Mr. Greenberg." The 2006 settlement was a similarly "self-interested act," the suit states.

Mr. Greenberg seeks contributions from the third-party defendants for any damages for which he may be held liable in the derivative suit, plus attorneys' fees and other costs.

Mr. Greenberg's suit names as defendants AIG President and CEO Martin Sullivan and Executive Vice President and CFO Steven Bensinger, among others (see box).

"In order to begin the process of holding AIG's current board and management accountable for their conduct, with his answer, Mr. Greenberg is also filing claims against them," David Boies, an attorney for Mr. Greenberg with New York firm Boies, Schiller & Flexner L.L.P., said in a statement.

In a statement, AIG said: "AIG's complaint was the product of a thorough investigation by a committee of independent directors. Mr. Greenberg's claims are inconsistent with the judgment of that independent committee and are without merit."

"PricewaterhouseCoopers is disappointed that Mr. Greenberg has included the firm among the 18 parties he has named in his third-party complaint. This complaint is apparently part of Mr. Greenberg's defense to the lawsuit brought against him ... by AIG. PricewaterhouseCoopers continues to stand behind its professional judgments regarding AIG and believes Mr. Greenberg's claims lack merit," said a spokesman for PwC.

Calls to INS Regulatory were not returned.

Response

Mr. Smith also plans to respond to AIG's complaint in the Delaware derivative litigation.

Also Vincent Sama, an attorney for Mr. Smith with the law firm of Winston & Strawn L.L.P. in New York, in a statement said that his client "will assert appropriate claims against those individuals and entities involved in the transactions at issue.

"AIG's action against Mr. Smith is particularly inappropriate as Mr. Smith was a primary advocate and champion of strong internal controls at AIG," Mr. Sama said in the statement.