AIG in 'Crisis,' Ex-Chief Says - TheStreet

Former

American International Group

(AIG) - Get Report

CEO Maurice "Hank" Greenberg slammed his old company in the wake of its big first quarter loss, and asked its board to postpone its annual shareholders meeting this week.

"AIG is in crisis," Greenberg wrote in a letter to the AIG board of directors, filed with the Securities & Exchange Commission on Monday.

Last Thursday, AIG announced a

record $7.8 billion quarterly loss

due in part to huge writedowns on its credit default swap portfolio. It also unveiled plans to raise $12.5 billion to shore up its balance sheet, while confounding some shareholders by also raising its dividend by 10%.

"These events have led to a complete loss of credibility with the investment community," Greenberg wrote. "The company's shareholders need to absorb the significance of the company's first quarter losses. They also need time to consider the board's response to the crisis and the issues raised by this letter. For this reason and others, a postponement of this week's annual meeting should be considered, so that all shareholders can give careful thought to how best to move AIG forward."

Greenberg was CEO of AIG for nearly four decades before he was ousted in 2005, when it was under investigation for its accounting. He's still fighting civil charges related to the investigation, although the prosecutor that led the charge against Greenberg, former New York Governor Eliot Spitzer, recently resigned in disgrace after admitting the he was engaging the services of a high-end prostitution ring.

Greenberg remains a major stakeholder of AIG and heads Starr International Co., a firm that is the company's largest shareholder. Shares of AIG have declined in price by more than 40% since Greenberg's departure, and they're down by 34% so far this year.

Meanwhile, there's plenty of bad blood between Greenberg and the global financial giant that he built. AIG recently sued him and six other former executives, alleging they misappropriated $20 billion worth of the company's shares.

The suit, filed in a New York state court, says Greenberg, Howard Smith, Edward Matthews, Ernest Stempel, L. Michael Murphy, John Roberts and Houghton Freeman, while members of Starr's board in 2005, "misappropriated" AIG stock held by the firm "for their own benefit," according to media reports. Starr is an entity created to protect AIG from a hostile takeover.

Last year, Greenberg and the other Starr executives launched a criticism of the direction and management of AIG in another SEC filing. In January, Mr. Greenberg said he wouldn't launch a proxy battle or serve again as an AIG officer or director, and said that he and the affiliated shareholders "do not currently intend to initiate a tender offer."

Greenberg's letter comes as

pressure mounts

for AIG CEO Martin Sullivan in the wake of the company's problems amid the credit crunch. The crisis already has claimed CEOs at

Merrill Lynch

( MER),

Citigroup

(C) - Get Report

,

Bear Stearns

( BSC) and

MBIA

(MBI) - Get Report

since last summer.

Meanwhile,

The Wall Street Journal

reported Monday that International Lease Finance Corp., an airplane-leasing giant run by one of AIG's largest shareholders, is considering splitting away from the insurance conglomerate to avoid being caught up further in its financial woes. ILFC is one of AIG's most profitable businesses.

Shares of AIG closed down $1.91, or 4.7%, to $38.37.