Hank Greenberg At War

One year after Hank Greenberg was forced out of the insurance empire he built, the wounds are still raw. Then again, his battle against AIG has only just begun

What's striking about Maurice R. "Hank" Greenberg these days is his determined air of playfulness. A man sometimes feared for his brusque manner, he greets me at the Park Avenue office of C.V. Starr & Co., the private insurance company he controls, by placing his hand gently on the small of my back. Having sat through interviews where the only refreshments were for him, this time I'm offered tea (albeit prepared the way he likes it). The former American International Group Inc. (AIG ) chairman asks about my travels. He teasingly taps me on the chin after chatting about the fun of starting over at 80 and crisscrossing the planet to try to build a new multibillion-dollar business through C.V. Starr and Starr International Co. -- lucrative private entities once affiliated with AIG. "I'm as busy as I've ever been," he says. The events of the past year may have humiliated Hank, but it's hard to find evidence that they have humbled him. As he says: "You don't tell the rank of a general by the size of his tent."

Indeed. The billionaire who once ruled the insurance industry and built AIG from a bit player to a $98 billion powerhouse isn't in this for fun. Mention the allegations of fraud that jettisoned him from the command post he occupied for 38 years, and Greenberg's eyes turn icy. Four seasons have passed since he was forced out as chairman and chief executive, yet the wounds remain raw. His new business projects now seem less an adventure than an act of revenge. "I have to start all over again," he says angrily.

"No Leadership"

Greenberg is at war, and he's crystal clear about who his enemies are. One is the man who he believes went after him for political reasons and smeared his reputation in the press: New York Attorney General Eliot Spitzer, who declined to be interviewed for this article. More important, Greenberg is targeting AIG. That's where he says he was betrayed, sacrificed out of cowardice, and stripped of honor. "It shouldn't have ended this way," he says. He has amassed a high-powered circle of lawyers that includes noted litigator David Boies and a public-relations team led by Howard Opinsky, the former campaign press secretary for U.S. Senator John McCain (R-Ariz.). Greenberg will fight for everything, whether it's more than $20 billion worth of stock or customers at the agencies he took with him. He regards AIG as already diminished, and he's not impressed with CEO Martin J. Sullivan, especially since AIG announced a $1.6 billion settlement with regulators last month.

Sullivan, the man Greenberg himself had positioned as a successor, not only aided in demonizing him to appease Spitzer, but he's proving to be a poor CEO, says Greenberg. "There's no leadership there," he contends. "The place is run by outside lawyers," he says, a charge AIG brushes off. Greenberg talks about dubious business decisions, a lack of fresh ideas, and a culture of fear in which old friends are told not to talk to him. "I'm concerned about the future growth of earnings," he says. Moreover, he found AIG's legal campaign to block C.V. Starr from working with other insurers to be "very distasteful." AIG even had his name taken off The Greenberg Suite at his beloved Portman Ritz-Carlton in Shanghai, which AIG partly owns. Would the man who directs about 16% of AIG stock through his personal holdings and Starr ever get out of AIG altogether? Not all at once, of course, but it's possible. "I'm going to wait and see," he says, with a thin smile. "Nothing stands forever."

Even some people who have known Greenberg for years claim to be stupefied by the rage just beneath the surface, incredulous that Greenberg won't let go. But he doesn't seem able to. He insists that he won't settle and that he did nothing wrong. He claims that he did too much, fought too hard, to have it end like this. Spitzer's high-profile civil suit and a Securities & Exchange Commission investigation are just the start of Greenberg's legal troubles. A more serious concern is the Justice Dept.'s ongoing criminal investigation focused on deals allegedly linked to Greenberg, although he has not been charged. Even the Starr Foundation, where Greenberg built his reputation as a philanthropist, is investigating Spitzer's claims that about 35 years ago its former chief helped to shortchange the charity of assets now worth $6 billion.


AIG's stance is to act as if Greenberg simply doesn't matter. He's yesterday's man, a leader who hung around too long and operated too close to the edge; he's euphemistically known as one of "certain former members of senior management" in AIG documents. There's palpable frustration in some quarters that he won't just apologize, pay a fine, and go away. He's not welcome as a subject of open discussion. A call to one executive at AIG's Manhattan headquarters prompts an audible sense of unease. "I really can't talk about that guy in the office," comes the hushed response. With all the lawsuits swirling around, people are even reluctant to laud his past accomplishments. Sullivan offers up only guarded praise when pressed to comment on his old boss. "I learned a lot from Mr. Greenberg, but I learned a lot from other people here as well," says the pleasant-faced Briton. "I'm focused on moving forward."

As long as Greenberg continues to wage war, though, he can't. Greenberg won't give up a penny of the $21 billion in AIG shares he controls through Starr International (SICO), the private company that for decades had served as a compensation vehicle for AIG employees -- and that he bragged was so critical to the company's success. "It differentiated AIG from all other companies and created a culture that was unique in Corporate America," Greenberg notes. AIG has sued for the bulk of those shares, arguing that they were committed solely to being used as future compensation for top AIG employees. But Greenberg no longer cares. He runs SICO and he's keeping it -- and even some AIG executives quietly admit they're unlikely to get anything back. Greenberg will pay out what's legally owed, including Sullivan's pot, but that's it.

Then there's the drama over the fate of C.V. Starr, which is now competing with AIG for business. As a managing general agent, it was a middleman for about $2 billion in premiums on policies underwritten solely by AIG. The agencies were often staffed with people who had similar roles and job titles inside AIG, leading some critics to call C.V. Starr a fictional intermediary snaring fees that should have flowed to the insurer. Greenberg dismisses those claims, noting that C.V. Starr provided the expertise and relationships with clients.

Greenberg has walked off with the bulk of that talent, taking back four specialized agencies: American International Marine Agency; American International Aviation Agency; Starr Tech, which focuses largely on the energy and chemical industries; and C.V. Starr, which handles excess casualty insurance in such areas as construction and trucking. He was willing to sell it all to AIG, but the offer was about $600 million short. On Mar. 15 he launched a national ad campaign to build a separate identity for the Starr agencies.

After the tense bidding came to an impasse, AIG severed all ties. Starr Tech began offering insurance on Feb. 28 underwritten by two AIG rivals, Berkshire Hathaway Inc. (BRK.A ) and Ace Ltd. (ACE ), whose CEO is Greenberg's son Evan. Berkshire, oddly enough, provided the backing for a suspect reinsurance policy through its Gen Re Corp. (BRK ) unit that first caught Spitzer's eye by allegedly boosting AIG's reserves by $500 million.

Until AIG's messy divorce from Greenberg, many customers weren't even aware that C.V. Starr was a private company. Many thought that they were essentially dealing with an arm of AIG. As one broker puts it: "That's who you were understood to be dealing with, and that was the paper backing you wanted." Some did know that it had morphed into an odd fraternity that awarded stakes to executives like Sullivan, who was bought out for an estimated $6 million last year. But no one anticipated a split.

Keeping Up Appearances

The suggestion that his companies can't thrive away from AIG makes Greenberg laugh. "That's wishful thinking," he says. The loser here, he says, is AIG, which provided only financial backing on deals structured by C.V. Starr. It was Starr that did the real work. If so, that's clearly an asset, says Patrick J. Gallagher, CEO of Arthur J. Gallagher & Co., the country's fourth-largest insurance broker. "If C.V. Starr still has the brain trust and the relationships, we will continue to access it for business." Moreover, says Greenberg, with its AAA rating, "Berkshire Hathaway is a better piece of paper these days."

Most brokers and risk managers are waiting to see what each company can offer. "Please don't ask me to get in the middle of Hank Greenberg and AIG," laughs one aviation industry risk manager. "They both scare me." Adds another risk manager in the energy sector: "I think of [Starr] as a startup, but it's a startup led by Hank Greenberg." Some clients, at least, happily anticipate a bloodbath. "The more capacity, the better," says one. "I look forward to having both of them fight for my business."

The atmosphere at Greenberg's office on the 17th floor of the Citigroup (C ) building is indeed akin to a startup, except it's run by silver-haired men with billions of dollars' worth of AIG stock. "We're starting all over again, only this time we're starting with a lot of money," says Edward E. Matthews, Greenberg's longtime friend and president of C.V. Starr, which with SICO has $1 billion worth of projects lined up. Instead of the Chinese antiquities and fine art now on display, the new space was initially spartan, like "camping out," Matthews says, adding that Greenberg "doesn't have to worry about managing 93,000 people anymore." Matthews concedes their ambitions go only so far. "At our age," he says, "we're not going to create another AIG."

Greenberg, though, is at pains to keep up appearances. He speaks at conferences, writes op-ed pieces for major newspapers, and meets with key people in the countries where he has traditionally been most welcome. The first thing he did when sitting down for an interview in the fall was pull out a medal, the Ancient Order of Sikatuna Lakan, the highest nonmilitary honor in the Philippines. "You can't downplay the Philippines," he says. Recently, he adds, he also got a certificate of honorary citizenship in Seoul and China's prestigious Marco Polo Award.

Greenberg feels particularly at home in China, which he first visited in 1975 and helped get into the World Trade Organization. Sitting on a red plush chair in a small waiting room at Beijing's Junwang Palace during a business forum in November, Greenberg noted that "there is a loyalty in China that is very refreshing. Once someone knows you," they'll look out for you. Indeed, the man beside him -- Long Yongtu, the chief negotiator for China's entry into the WTO -- is quick to note that "Mr. Greenberg is the most famous U.S. business leader in this country. Perhaps most important, he is a long-standing friend of the Chinese people." Now that's the kind of treatment a man of his stature is used to getting.

At lunch in midtown Manhattan last month, Greenberg talked about the hundreds of supportive calls and letters he has received. Moreover, people want to work for him, he says. Sitting in a 50th-floor dining room of The McGraw-Hill Building, he remarks that "if I hired everybody who called me, I would need a building as big as this." In addition to the 400 people working in the insurance agencies, he has about 20 working for C.V. Starr in New York and a dozen more at SICO worldwide.

The one small measure of good to come out of the crisis, Greenberg says, is that it has brought his once fractious family closer. His two eldest sons, Jeff and Evan, were rivals to succeed him at AIG in the old days. But first Jeff, then Evan, left the company. Today, Hank hopes to work on some deals with Jeff, who had his own run-in with Spitzer. He was forced out of Marsh & McLennan Cos. (MMC ) in October, 2004, after the Attorney General charged the company's insurance brokerage unit with bid-rigging and accepting kickbacks. Marsh settled, and Jeff is now in private equity. Evan is in charge at Ace, which is working with C.V. Starr. Both were approached for comment through their father, but declined. Meanwhile, Greenberg is doing some business with his youngest son, Scott, a lawyer and private equity investor. Scott is also reluctant to say much about his dad. "I don't want to opine on him or his mindset," he says. The most he'll say is that his dad "seems energized and is having fun."

Protective Measures

Perhaps. But it's the outcome of events surrounding his departure from AIG that will determine Greenberg's legacy, not his new business ventures. Within the insurance world, there does seem to be a general sense that what happened was unfair, that Greenberg's actions were aimed at protecting his precious AIG. "All he ever cared about was that company," says one industry veteran. "His heart must be ripped in two." After a brief moment of reflection, Greenberg says: "You learn a lot about people. There are friends and friends. It's very easy to be a friend when there's nothing to so-called lose. You have to have the courage to be a friend when it's not so easy."

At least one AIG board member feels guilty about kicking Greenberg out, saying the ouster was made necessary by Spitzer's threat to indict the company if the boss stayed in place. (Spitzer's deputy, Michele Hirshman, denies that such a threat was ever made.) "This is an honest man," says the board member. "Some money was maybe put in the wrong column, but Hank only cared about AIG." Attorney Boies, meanwhile, bristles at AIG's derogatory references to "former" management in its statements. "The former management is current management," he argues. "All of these people were totally on board with actions they're now against."

Greenberg views Spitzer as a vindictive man who disregards due process. As he sees it, Spitzer was out to get him and personally brought down his son. Despite AIG'S settlement, he's determined to go to court to prove the allegations against him are false and says he wants to do it before the Attorney General leaves office in November, when he's expected to run for governor of New York. As Greenberg's friend and former chairman of Goldman, Sachs & Co. (GS ), John C. Whitehead, puts it: "I don't think there's justice for him until this comes to trial." Hirshman shrugs off the heated rhetoric, arguing that "the idea that there's a personal vendetta here is somewhat absurd." She also says that Greenberg's case is unlikely to go to trial before Spitzer leaves. "We're handling this like any other case," she says.

However serious the charges against him may be, those closest to Greenberg say he has already lost what mattered most to him. "For him to be deprived of ending his career at AIG with dignity and honor is the worst punishment anyone could inflict," says former Secretary of State Henry Kissinger. And Hank Greenberg is not about to forgive the people who he believes betrayed him, especially those at the company he built.

By Diane Brady, with Dexter Roberts in Beijing

— With assistance by Dexter Roberts

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