Report: AIG’s Greenberg to retire as SEC subpoenas execs

Justin Bachman

Tuesday, March 29, 2005 | 11:06 a.m.

NEW YORK -- The man who built American International Group Inc. into one of the world's largest insurers, Maurice "Hank" Greenberg, is retiring as chairman, two weeks after board members ousted him as chief executive because of intensifying regulatory probes into the company's past financial transactions.

Greenberg -- who will end his 37-year career atop AIG later this week -- departs as he and the company face an expanding probe by the Securities and Exchange Commission and New York State Attorney General Eliot Spitzer.

Meanwhile, The Wall Street Journal reported in today's editions that Warren Buffett, the billionaire investor who is chairman and CEO of Berkshire Hathaway Inc., has been called by regulators to answer questions next month. The Journal, citing unidentified sources familiar with the case, said Buffett will be asked about any involvement he might have had in a controversial insurance transaction between a Berkshire unit and AIG.

AIG replaced Greenberg, 79, as CEO March 14 as scrutiny mounted over a 2000 transaction that appeared to have been used to artificially boost the company's reserves. Since then, SEC investigators have issued subpoenas for a dozen AIG executives and have uncovered 10 financial transactions that warrant greater scrutiny, a source told the Associated Press on Monday, confirming an earlier report in the Journal.

There had been widespread speculation about how long New York-based AIG would continue its relationship with Greenberg, who also faces an April 12 meeting with Spitzer's investigators in response to a subpoena.

Under investigation are a number of reinsurance transactions -- insurance purchased by insurance companies -- that regulators contend were designed to improve AIG's financial statements without the transfer of risk. Risk transfer is necessary for a deal to be an insurance transaction and determines how it's carried on a company's books.

Greenberg joined the company in 1960, and took over as its head eight years later when founder C.V. Starr died. While Greenberg is considered a pioneer in the insurance world, his presence at the company had become seen as an obstacle for AIG in settling the regulatory inquiries.

AIG said lead director Frank G. Zarb will assume the duties of chairman until a new one is selected.

Regulators expect to interview Buffett on April 11 about documents and witnesses that they believe indicate he was involved early on in discussions about the transaction between General Re Corp., a unit of Berkshire Hathaway, and AIG, including its structure, the source told the Journal. Buffett, 74, is scheduled to give a deposition the following day.

Investigators suspect that before General Re completed the transaction in 2000, the unit's then-CEO, Ron Ferguson, briefed Buffett on the nature of the deal, the Journal said, citing its source.

Buffett declined through a spokeswoman to comment for the Journal story. Ferguson, reached by phone by the Journal, declined to comment.