Jan. 7 (Bloomberg) -- Maurice “Hank” Greenberg, the former chief executive officer of American International Group Inc., says in a soon-to-be-published book that the company he built was almost destroyed by overzealous overseers.
The insurer was “ultimately taken over and run aground by a cadre of auditors, lawyers, outside directors, and government officials,” according to an excerpt of “The AIG Story” on Amazon.com Inc.’s website. “Contrary to proponents of anointing such professionals as ‘gatekeepers’ who police against corporate misconduct, the AIG story shows how such custodians run amok.”
Greenberg, 87, ran AIG for almost four decades until he was forced out in 2005 amid a fraud probe by then-New York Attorney General Eliot Spitzer. The company accumulated billions of dollars in losses tied to subprime mortgages starting in 2007 under CEO Martin Sullivan and was bailed out by the U.S. in 2008. The New York-based company sold more than $70 billion in assets to help repay the rescue.
Greenberg told Congress in 2008 that controls he put in place to limit risk were weakened or eliminated after he left. His book, co-written with Lawrence Cunningham, a professor at George Washington University’s law school, highlights what Greenberg says are the dangers of shifting leadership from a strong CEO.
“In the inapt guise of promoting ‘shareholder democracy,’ activists and regulators homogenized corporate America in recent years by imposing a one-size-fits-all governance model that often ignores the special cultures of particular businesses,” according to the preface of the book.
AIG agreed in 2006 to pay $1.64 billion to settle a fraud probe by regulators including Spitzer, who accused the company in a suit of rigging bids, duping shareholders and underfunding workers’ compensation pools. Spitzer subsequently dropped portions of the case against Greenberg, who denies wrongdoing.
“The saga of AIG’s near destruction is a reminder that the rule of law is not inevitable in America, where it can be undermined when citizens are supine in the face of official coercion,” according to the book.
A federal judge last year dismissed a suit by Greenberg’s Starr International Co. against the Federal Reserve Bank of New York over the bailout of AIG. Starr said the New York Fed breached its fiduciary duty to AIG shareholders in its rescue by loaning $85 billion at 14.5 percent interest while offering better terms to rescued banks.
Greenberg credits AIG’s employees for a turnaround at the insurer, which repaid the $182.3 billion rescue last year. AIG stock has rallied more than 50 percent in the past year.
The book’s publication date is Jan. 29, according to Amazon.
To contact the reporter on this story: Zachary Tracer in New York at email@example.com
To contact the editor responsible for this story: Dan Kraut at firstname.lastname@example.org