Spitzer Trains Biggest Guns on Greenberg

Hank Greenberg's a bad man. A very bad man.

That's the takeaway from New York Attorney General Eliot Spitzer's much-anticipated civil suit filed Thursday against Greenberg, the insurance industry titan and longtime chief executive and patriarch of American International Group(AIG Quote).

Sure, AIG is named as the lead defendant in the 38-page lawsuit. But make no mistake about it: Spitzer's lawsuit is all about Greenberg and his loyal deputy, former CFO Howard Smith.

The way Spitzer sees it, the two executives were the architects of a series of "fraudulent schemes" that "misled the investing public as to the true state of AIG's business."

Spitzer never quantifies the cost to shareholders. Instead, he contends AIG "routinely engaged" in misleading accounting from the 1980s until Greenberg's forced departure this year, even though most of the allegations go back no further than 1999.

In fact, Spitzer, in a press release announcing the filing of the lawsuit, suggests that much of alleged wrongdoing was merely cheating on the margins by Greenberg in order to prop up AIG stock.

"The irony of this case is that AIG was a well-run and profitable company that didn't need to cheat," Spitzer says. "And yet, the former top management routinely and persistently resorted to deception and fraud in an apparent effort to improve the company's financial results."

In the complaint, Spitzer describes Greenberg's obsession with AIG's stock price and his history of barking orders at AIG traders, demanding they buy up the company's shares in order to support the share price. The complaint quotes Greenberg telling one trader earlier this year: "I don't want the stock below $66, so keep buying.''

When it comes to the actual accounting, there's few new allegations. Most of what Spitzer trots out was already known and has been belatedly disclosed by AIG the past several weeks. The company is expected to reveal more details on its flawed financials next Tuesday when it files its long overdue 2005 annual report.

Indeed, AIG officials breathed a sigh of relief after the complaint was made public.

"There are no new claims raised in the complaint,'' said AIG spokesman Chris Winans. "We are pleased that Attorney General Spitzer has recognized our cooperation and has previously indicated his expectations of reaching a civil settlement with AIG.''