AIG Sued by Ex-CEO for Securities Fraud

By Evan Mix

Published on March 06, 2009

Insurance giant AIG Inc. faces a lawsuit alleging securities fraud from former CEO Maurice "Hank" Greenberg. Greenberg accepted stock in the company as part of a deferred compensation profit-participation plan when he retired in 2005. The suit, filed in federal court this week, claims the company made earnings-related misrepresentations and omissions that artificially inflated its stock prices, causing Greenberg to pay excessive income taxes.

The allegations stem from AIG's record-setting fourth-quarter loss of $61.7 billion, which was significantly higher than the company's previous estimates and required the already floundering company to seek billions of dollars in additional government aid. Greenberg seeks compensation for excessive taxes as well as the alleged price inflation. A specific amount has not yet been named.

Greenberg's suit comes on the heels of another controversy between AIG and its former CEO. Current AIG CEO Edward Liddy recently implied in an interview that Greenberg was responsible for the formation of AIG's financial products unit, which sold derivatives ultimately requiring $30 billion in writedowns and the initial government bailout. Greenberg has claimed that safeguards he put in place to control risk were eliminated or weakened after he resigned.

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