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Ex-AIG CEO, others to pay $115 million to settle lawsuit: source
2009-08-13
NEW YORK (Reuters) - Former AIG chief executive, Maurice "Hank" Greenberg, and five other defendants, have agreed to pay $115 million to settle a shareholder lawsuit, according to a person familiar with the matter. The cost of the settlement is expected to be largely recouped through an insurance policy that covers company directors and officers against the cost of lawsuits, according to the person. The development comes days after Greenberg and former AIG chief financial officer Howard Smith reached an agreement to settle accusations by the U.S. Securities and Exchange Commission that they had altered AIG's financial records from 2000 to 2005 to inflate the insurer's earnings. Smith would also be covered by the settlement, as would former AIG reinsurance executive Christian Milton, former AIG controller Michael Castelli and two companies controlled by Greenberg, C.V. Starr & Co and Starr International Co, said the person who was not authorized to speak publicly on the matter. The settlement is contingent on the lawsuit getting class action status, which a New York judge could make a decision on this week. The lawsuit was brought by several Ohio pension funds in 2004, claiming the funds lost money on their investment in AIG because of misaccounting and fraudulent practices related to brokerage compensation by AIG from 1999 to 2004, and includes AIG's restatement of its financial results in 2005. Several other defendants have already settled the same lawsuit, including Berkshire Hathaway's (BRKa.N) (BRKb.N) General Re Corp, which had entered into a reinsurance transaction with AIG that improperly boosted its loss reserves, and AIG's auditor PricewaterhouseCoopers. But some other defendants have not reached agreements with the Ohio pension funds, including American International Group Inc, which had to take a $180 billion federal rescue package to keep from collapsing under derivatives losses last year. Greenberg, who built AIG into the world's largest insurer over 38 years as CEO, was forced to resign in 2005 because he refused to cooperate with an internal investigation into the insurer's accounting practices, which were unrelated to the company's current financial woes. If the settlement is finalized it will be one more issue related to AIG that Greenberg, 84, can put behind him. Greenberg, Smith and corporate entities associated with them have been embroiled for more than four years in lawsuits brought by AIG, its shareholders, or regulators. Apart from the recent settlement of SEC charges, a jury last month found that Greenberg-controlled Starr International had not improperly raided a block of AIG shares that were once used to fund long-term compensation for AIG executives. U.S. district judge Jed Rakoff is expected to reach a final decision on that matter this month. (Reporting by Lilla Zuill; Editing Bernard Orr)
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