Friday, December 16, 2005

Spitzer Lobs a "Public Stink Bomb"

New York Attorney General Eliot Spitzer sent a letter to the Starr Foundation alleging the former American International Group CEO Maurice Greenberg and other AIG officers fraudulently caused the foundation to sell AIG shares at a depressed price to two other companies controlled by Greenberg back in 1970.  This is part of the ongoing battle between Spitzer's office and Greenberg regarding allegations that AIG did not properly account for certain insurance products and misled investors regarding its financial condition.  Spitzer effectively forced Greenberg from his position at AIG in March 2005 after nearly forty years in office.

Cornelius Vander Starr founded AIG, and after his death Greenberg and other company executives were the trustees of his foundation and sold AIG shares to C.V. Starr & Co. and Starr International Co., two private entities headed by Greenberg that control large blocks of AIG stock and were used as a means to compensate senior AIG executives.  Spitzer's letter alleges that the trustees, specifically Greenberg, sold the shares to benefit themselves through the private companies they controlled, at a cost to the Foundation of $6 billion based on the current value of the stock. 

Needless to say, Greenberg has fired back, disputing the allegations and accusing Spitzer of trying to "demonize" him.  Kenneth Langone, former chairman of the board of the New York Stock Exchange who is a defendant in another lawsuit filed by Spitzer's office regarding excessive pay to former NYSE CEO Richard Grasso, said that Spitzer "is trying to shore up his sorry case and his flagging political reputation by lobbing what amounts to a public stink bomb.''  Greenberg even allowed that he planned to support opponents of Spitzer in his campaign to be Governor of New York.  This case is starting to rival the Ronnie Earle-Tom DeLay case for its level of personal animosity.  An AP story (here) and Bloomberg story (here) discuss this latest turn in the Spitzer-Greenberg tussle. (ph)

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