AIG's Liddy, Greenberg Locked In Battle

Even as AIG posts its largest quarterly loss in the history of Wall Street, and announced it was accepting another $30 billion government infusion, the company is reeling from a battle between its founder and current CEO.

On Monday, Maurice "Hank" Greenberg filed a suit in federal court in Manhattan against the company, alleging it perpetrated securities fraud.

According to Bloomberg, he said:

The company's "material misrepresentations and omissions" caused him to acquire New York-based AIG shares in his deferred compensation profit-participation plan at an "artificially inflated price."

The suit was filed the same day embattled AIG CEO Edward Liddy told Bloomberg News that Greenberg was at in charge when the AIG unit that caused much of the damage was created.

"I think he's responsible" for some of the insurer's struggles... "The formation of the AIGFP unit, which has literally brought us to our knees, that happened on his watch. The compensation systems that have gone astray, happened on his watch. I don't think it's as clean and simple as sometimes Hank would like to portray."

While the exact damage to Greenberg's wallet wasn't specified, the New York Post reported Greenberg owned 3.7 million shares of AIG stock under this deferred-compensation package in January 2008. The lawsuit demands a return of $70 million in taxes the AIG founder paid on the $200 million in stock.

Greenberg said Liddy's attacks "are apparently designed to deflect attention from AIG's disastrous performance since Mr. Greenberg retired four years ago, and to distract attention from its wasteful use of shareholder and taxpayer funds since that time," according to a statement received by the New York Post.

The embattled Liddy was appointed in September to run the giant insurer after it agreed to turn over 80% of the company to the government in exchange for an $85 billion bailout. On Monday, it announced it would need another $30 billion.

AIG is also trying to convince the government the company's failure would carry systemic risk that could cause the entire insurance industry to falter, according to this story in the New York Times.

The company's stock is trading relatively flat, at around $0.47 a share.

Greenberg tells CNBC he lost $2 billion, discusses the company's losses.

WATCH:

Comments

[mateoconifer]

LET IT FAIL and GREENBERG is a crook.

[harrymellon]

I bet you could find Greenberg at Bohemia Grove worshipping the demon Molech and sacrificing children in the Cremation of Care.

[ridah1o1]

Let AIG crumble and let a new industry or a new insurer take its place. They are not so important that they are indispensible. Issue discussed further detail here: http://www.ricoexplainsitall.com/politcs-economy/2009/3/4/the-irrational-aig-bailout.html

[Bettysdad]

A while back, Greenberg funded a right-wing think tank devoted to getting laws passed that would deny shareholders the right to sue corporate execs if the shareholder believed the execs had committed fraud and made them lose money. He spent over $25mil over the years on this.

The laws never got passed.

If they had, Greenberg would not be able to bring the lawsuit he's bringing today.

It's truly astounding.

[privategirl]

Yep, the currupt looking out for themselves. Only to now want people to feel sorry for them.

When is AIG going down. Everything about the company seems currupt.

As someone here posted awhile back, continously bailing out AIG is like putting new wine into old wine skin. We need to start back over.

[raven29520]

Even after this they continue to receive taxpayer money. Life is wonderful and lawless!

[breakingpoint]

Selling Wall Street Insurance was foolish especially, when they had guys watching the bad mortgage bundling. One has to wonder were they really that stupid or were they skimming off the top in subsidiaries companies.

Let them go bust and open the books.

full transparency please.

[harrymellon]

Greenberg is pure evil....he looks like he sold his soul to the devil.

[larry278]

If Greenberg sold his soul to Satan, he got the top dollar from Satan overcharged him. That's the hell of it. When Greenberg gets to hell, Greenberg will take over hell & throw Satan out. Satan as a homeless person, that's rich.

[Ping]

This guy Liddy was on CNBC this morning and he said he lost $2 billion dollars when the price of AIG tanked. Too bad.

Now he is suing AIG, of course AIG is now owed by the Feds, for the money he lost in the stock market. The CNBC crew asked him at the end of the interview why he didn't sell his shares and he replied that he never knew things could go so bad. Well that's just too bad isn't it? Maybe if he had cashed in early instead of being greedy....

Mr Liddy's along with many of the Madoff victims who incredibly invested everything with Bernie, have only themselves to blame.

[Ping]

Greenberg, I meant Greenberg. Liddy is the new guy at AIG.

[master09]

All of these big time financial kings can thank their lucky stars that they don't live in china because there would be a lot of heads rolling in the streets.

[jeanrenoir]

If we have a real Depression, with 25% unemployment and the Middle Class truly wiped out, heads may roll here too. The rage of the public already is way beyond that of the Depression because of the incredible levels of greed and arrogance and Ponzi scheme criminality at the core of our financial system for the past decade, much worse than the Roaring Twenties, and the public knows it. If Obama's fixes don't work, we are guaranteed a successful demagogue in the White House who might win on an outright anti-semitic platform. America now is approaching Germany in 1923, the economic seedbed for Nazism.

[privategirl]

This is the time when you want them to live in China.

They live in a country where some get mad at those who want to hold them responsible. Welcome to Capitalism.

[Wild West]

He should rot in jail.

[treetracker]

S&P and Moody's rated all the crap as AAA - go after them, unless, of course, you were working in collusion with them - then it's a criminal matter. Hmmm

[apduncan1]

Indeed, the rating companies ought to be sued by the investors.

[jeanrenoir]

The levels of criminality in the American financial system in the past decade are amazing, from top to bottom. And the public knows it now, chapter and verse. A dangerous political time bomb.

[poliguy70130]

Greenberg may have been head of the unit, but AIG's trouble began before the meltdown in the financial markets. The problems at AIG began after Mr. Greenberg departed. Its pretty clear from reading AIG's financials, that they didn't get into all the speculative insurance vehicles until after Mr. Greenberg had departed. The problem here is that AIG's board of directors is obviously incompetent and ineffective. The company has gone through numerous CEOs since Mr. Greenberg, none of whom stayed long enough to do any good. AIG needs to bring back Mr. Greenberg if it wants to survive. Under his leadership the company weathered financial ups and downs, but always bounced back. At this point, AIG seems like a plane flying pilotless. If they dont bring back Greenberg, its not a question of if AIG will crash but when.

[EarthX]

to poliguy70130:

Uh... no.

All the items that caused AIG's downfall began under Greenberg, with his demand of 15% earnings growth above all other considerations.

The company actually got more conservative after he left, not less.

He just happened to leave before the bubble burst.

Don't by his hype, or his revisionist history.

[chgoborn]

that is a flat-out lie. maurice greenberg invented credit default swaps, the entire problem. greenberg belongs in a jail cell and would be there if spitzer hadn't given him a get-out-of-jail free card for his fraudulent behavior ( while he was still gov, obv) check your facts, dude.

[beauregard62]

LET IT FAIL

[helen]

Agreed.

[EyeballKid]

The repercussions would be massive, if my reading of the problem has any credibility. AIG reportedly owns nearly all of China's insurance contracts. China. All of it. If AIG collapses, we should all be concerned about what China will do to protect its own interests. That's China, who is perhaps the US' major source of credit, and holder of Hundred of Billions in US securities.

There's common sense to the perspective that Obama should allow AIG to fail, but the unintended consequences might hurt all of us beyond our wildest, and darkest predictions.

[psch]

NYTimes today (http://www.nytimes.com/2009/03/04/business/economy/04webecon.html?_r=1&hp) : "But for now, he said, helping the company is the best option, not just for its humbled executives but for the average taxpayer."

Humbled executives??? I'd like to see how humbled they are. Until now only a lot of arrogance has been on display across the all the failing institutions.

[usedtowander]

They both had their fingers in this pie.

Why not a class action suit from the shareholders to go after all of the officers in the company?
Then and now.

Why hasn't the SEC and the DOJ initiated a serious investigation of shareholder fraud? How much did these corporate officers take from the company while the stock dropped like a rock? And, how much did they know? And, when?

I guess Holder is too busy and doesn't have enough courage to get to it.

I just don't see much difference between the Bush Administration and the Obama Administration - except that Obama is giving more taxpayer money to bankers and financial executives that Bush even imagined.

[checkmoot]

The main difference between the Bush and Obama administrations is that Bush had eight years to screw things up, while Obama has had eight weeks to try to fix things. Maybe he'll succceed and maybe he will not. Let's hope he does, but don't blame him. He cannot just wave a magic wand and undo what has been done by his predecessor.