Legal News

Hank Greenberg Settles AIG Suit in Delaware, Deposed in New York

By Dan Slater

Resolution of one of the biggest corporate feuds in the last decade moved forward yesterday on two fronts: Former AIG Chief Hank Greenberg and three other AIG executives settled for $115 million a 2002 lawsuit filed against him and others in Delaware. Back in New York, Greenberg gave a deposition to the office of NY AG Andrew Cuomo — a sign, writes the WSJ’s Amir Efrati, that settlement talks have stalled in a civil fraud case.

The Delaware case involved the relationship AIG had with an insurance firm that Greenberg heads, C.V. Starr & Co., which underwrote some of AIG’s business. The suit was filed as a shareholder action on behalf of AIG and was scheduled to go to trial on Monday. It accused the four men of improperly diverting more than $1 billion from AIG to C.V. Starr, where they also served as officers and received compensation.

Lee Wolosky, a lawyer for Mr. Greenberg, said the former CEO won’t make any settlement payments from his own pocket, meaning the settlement will be paid out by a D&O insurance policy. The “arrangements Mr. Greenberg presided over while at AIG were not only proper, but contributed to AIG’s growth into the largest and most successful insurance company in the world,” Wolosky said.

Stuart Grant, a lawyer for the plaintiffs, said in a statement: “This is a hugely important settlement for shareholders, one that not only returns some of C.V. Starr’s ill-gotten profits to AIG shareholders, but also advances critical corporate governance goals.” (AIG approved the settlement, notes the WSJ, but it doesn’t resolve other outstanding disputes between the company and Greenberg.)

In the New York case, which was brought by former AG Eliot Spitzer and stems from an accounting probe of AIG that led to Greenberg’s departure in 2005, state lawyers will ask Greenberg about his role at the head of AIG and his involvement in specific deals that led to the company’s earnings restatement in 2005, as well as adjustments AIG made to the financials of its subsidiaries.

Photo: Associated Press

Full post as published by Law Blog - WSJ.com on September 12, 2008 (boomark / email).