LONDON — American International Group (AIG), an insurer bailed out by the US government, agreed this week to settle all legal disputes with former CEO Maurice Greenberg and may reimburse as much as 150m in fees.
A former US judge would determine how much AIG must pay in legal expenses for Greenberg and former finance chief Howard Smith, the New York-based insurer said on Wednesday.
AIG will return photo s, a Persian rug and other personal belongings to Greenberg, who also gets access to archival materials to write his memoirs as part of the deal.
“It was a long, really expensive fight, and AIG just basically said ‘ uncle’,” said former federal prosecutor Christopher Clark, a partner at Dewey & LeBoeuf in New York . “I’m sure that AIG is not looking to trumpet the fact that having lost all of its claims against Greenberg, they now have to pay all of his legal fees.”
Greenberg ran AIG for almost 40 years and built it into the world’s largest insurer until he was forced to retire in March 2005 amid state and federal probes into a reinsurance transaction. A tangle of lawsuits have kept AIG and its former CEO in court since his departure.
AIG and Greenberg agreed that Layn Phillips would review legal expenses. Phillips is a partner at Irell & Manella , a former judge and former US attorney for Oklahoma, according to the firm’s website. AIG and two Greenberg-run investment firms agreed not to make disparaging statements about each other.
“The resolution of these … disputes will remove a significant distraction and expense and allow AIG to better focus its efforts on paying back taxpayers,” CEO Robert Benmosche said .
Greenberg thanked Benmosche, and said he looked “forward to assist AIG in trying to preserve and restore as much value as possible for all of AIG’s stakeholders”.
Former New York attorney-general Eliot Spitzer sued Greenberg and Smith in 2005, alleging they misled regulators. Spitzer dropped portions of the suit in 2006 and Greenberg asked a court to dismiss the rest. The New York suit was not affected by this settlement, Greenberg’s lawyer, David Boies, said .
AIG eventually restated earnings and agreed to pay 1,64b n to settle claims by Spitzer and other regulators, without admitting or denying wrongdoing. In court papers filed in July 2006, Greenberg argued AIG’s 2005 restatement was unnecessary and designed to force him to retire. He denied any wrongdoing in the New York civil suit.