AIG, Greenberg to Resolve Rift in Private
Updated from Aug. 31
NEW YORK (
) -- In a sign that new CEO Robert Benmosche's moves are paying off, two former top executives of
American International Group
(AIG) - Get Report
have agreed to settle legal disputes with the firm through private arbitration rather than lengthy public trials.
Former Chairman and CEO Maurice "Hank" Greenberg and former CFO Howard Smith have been involved in various legal disputes with the insurer since they were ousted in 2005 amid a wide-ranging accounting probe.
Greenberg spent nearly half a century building AIG into the large, complex company that it was when the government stepped in with a rescue plan last fall. Benmosche, who took over the reins of AIG last month after a career at life insurance rival
MetLife
(MET) - Get Report
, has reached out to Greenberg as an adviser.
As part of the settlement, Greenberg, Smith and AIG agreed to submit claims related to two civil suits over derivatives immediately into binding arbitration. They will also consider arbitration for AIG claims against Greenberg's Starr International Company, which is the largest private investor in AIG, as well as Greenberg's claims against AIG related to subprime investments.
The parties have agreed to propose lists of potential arbitrators by Sept. 15, and will choose one by Sept. 30. They aim to have a "final, binding" decision set by March 31.
Earlier this month, Greenberg, Smith and a group of other former executives agreed to pay $115 million to settle a shareholder lawsuit over alleged false statements regarding the insurer's financial results. They also settled with the
Securities and Exchange Commission
, without admitting or denying wrongdoing, with Greenberg agreeing to pay $15 million, and Smith agreeing to pay $1.5 million.
AIG shares closed down 9.8% at $45.33 and fell to $43.75 in after-hours trading.
Benmosche has come into AIG in full force, on a public campaign to boost confidence in the firm's ability to survive, and support downtrodden employees who have been publicly castigated as greedy ne'er-do-wells. He has said he will reevaluate the firm's portfolio of holdings to be dismantled, and promised to hold out on selling them until he gets a fair price.
His moves represent a stark comparison to his immediate predecessor, Edward Liddy, who was chosen by regulators to shepherd the firm in its initial stages of bailout stress. Liddy, the former head of
Allstate
(ALL) - Get Report
, earned $1 per year in compensation and was criticized for being slow in selling assets when pricing was more competitive and for not standing up for employees during Congressional hearings.
Benmosche is earning a salary of at least $7 million his first year, has promised competitive compensation to employees, and has been very vocal in his efforts to lead the company as a private enterprise that happens to be 80% government owned. His discussions with Greenberg, reported over the weekend by the
Wall Street Journal
, seemed a marked shange from the treatment Greenberg has received by his successors since he relinquished control.
"We have to respect what he has done in the past. You can't discount what he's done," Benmosche, told the
Journal
, referring to Greenberg as "the senior statesman of our industry."
-- Written by Lauren Tara LaCapra in New York
.
