Maurice R. Greenberg
March 30, 2010 in United States
Former CEO, American International Group, Inc., 1968-20051
Former Chairman, Council on Foreign Relations
Former Chairman, Director, and Deputy Director, Federal Reserve Bank of New York
Former Director, New York Stock Exchange
Chairman, Starr Foundation
Chairman and CEO, C. V. Starr & Co., Inc.
Connected with several firms related to U.S. intelligence activities
Previously nominated to be Director of Central Intelligence
Frequent attendee of Bilderberg Meetings2
Maurice Raymond “Hank” Greenberg was born May 4, 1925 in New York City, the son of a Jewish candy store owner Jacob Greenberg. His father died when he was seven and his mother, Ada Rheingold, married a dairy farmer who lived in the Catskill mountains. Greenberg lied about his age in 1942, claiming he was seventeen, so that he could enlist in the Army. He later became an Army Ranger, landing on Omaha Beach on D-Day and participating in the liberation of Dachau in 1945. After the war, Mr. Greenberg received his undergraduate degree from the University of Miami Florida in 1948 and earned his L.L.B. from New York Law School in 1950.3 He was admitted to the bar in 1952.4 He went on to serve during the Korean conflict, taking a position in the Judge Advocate General’s Corps.
In 1953, Mr. Greenberg talked his way into a position at the offices of Continental Casualty in Manhattan. In 1959, he was appointed vice-president, becoming the youngest executive in the company’s history. In 1960, J. Milburn Smith, the president of Chicago-based Continental Casualty Co., recommended Greenberg to Cornelius Vander Starr, founder of C.V. Starr & Co. Starr was a former/current intelligence operative with the Office of Strategic Services (OSS), the precursor to the modern Central Intelligence Agency, who had run a succesful insurance company in Hong Kong and was utilized tapped by American intelligence officials to operate covert networks in China prior to the Communist Revolution.5
Towards the end of Mr. Starr’s life, he took a particular dislike of Mr. Greenberg. A memo circulated to C.V. Starr shareholders in 1968 said:
Another sign of the effect of Mr. Starr’s illness on him has been his tendency lately to criticise severely or attack almost everybody with whom he works. In recent months, he has criticized Greenberg for being greedy, rough and Jewish; Manton for being stupid; Ahlers for being narrow, bad with people and endangering the UBank in illiquid Latin American investments; Tweedy for being weak and run by Mrs. Tweedy; Roberts as being inadequate to run AIUO worldwide, hence he should share it with Buck Freeman; Freeman for not knowing the business; Stempel for being merely a caretaker and one who could not run and should not run AIRCO; even K.K. he says is no good in recruiting and training people or building replacements. . . . I would hate to hear what he says about “yours truly.”6
Overseeing AIG’s Illicit Business Practices
During his tenure as CEO of AIG, Mr. Greenberg greatly expanded the company’s offshore reach, by overseeing the creation of hundreds of shell companies in offshore jurisdictions.
One of the heated criticisms people have made about AIG for many years, and especially since the company confronted its accounting and related crises, is that it is too complicated.
When Starr was alive there were fewer than 100 companies, many offshore. By the time Greenberg resigned, there were hundreds of companies, again many offshore. Some would argue it is not only complex, but impenetrable to an outsider, and especially to insurance regulators. That has its advantages. Good for dealing with regulators, bad for investors, especially in this age of transparency. Yet to someone familiar with the corporation, the maze really is not so complicated, and Starr clearly was not trying to make it more complicated, especially since the regulatory issues of the 1940s were not what they are today. The overriding issue is that because so many of the companies are incorporated and domiciled offshore, it makes regulators suspicious, and it is true that the elaborate corporate organization chart could provide the means for chicanery.7
In 2004, New York Attorney General Eliot Spitzer brought bid rigging charges against Marsh & McLennan and several insurance companies, including AIG. At the time of the alleged rigging, the CEO of Marsh & McLennan was Jeffrey W. Greenberg, son of Maurice Greenberg. 8
In 2003 and 2004, AIG became embroiled in a series of fraud investigations conducted by the Securities and Exchange Commission, U.S. Justice Department, and New York State Attorney General’s Office. One of the cases, involving PNC Financial Services, involved utilizing AIG’s Financial Products Division to create “special purpose vehicles” for moving $762 million into off-balance-sheet entities to improve the companies fiscal appearance.
According to Fortune magazine, the board of AIG was particularly bothered by Mr. Greenberg’s “pushing around” regulators during the settlement process. A group of individuals, including Council on Foreign Relations co-chair Carla Hills and Henry Kissinger, reportedly appealed to the board to not force Mr. Greenberg to leave amid the growing scandals. On March 13, 2005 Greenberg was reportedly asked to resign in a meeting of AIG’s directors which he attended via periodic phone calls from his yacht, the Serendipity II, off the coast of Florida.9 On March 23, 2005 a team sent by Mr. Greenberg’s lawyer used an employee passkey to access the empty office of AIG’s Bermuda operations and removed 80 boxes of documents.
A Christian Science Monitor report in 2005 summarized the case:
American International Group (AIG) – which is part of the Dow Jones Industrial Average – which has now admitted to $1.7 billion in improper accounting. And, it has enveloped some legends in the financial arena: Maurice “Hank” Greenberg, forced out as chairman of AIG, and Warren Buffet, the Omaha stock market guru, who will be questioned about his possible involvement.
Because AIG is so massive and important to the financial world, regulators will have to tread carefully. The company’s main business is providing reinsurance, that is, it insures insurance companies. This helps the industry to spread its risk among many large and financially sound companies so a single event does not become a financial disaster for one company.
Also, because of AIG’s huge size, lawyers don’t think the government will bring a criminal charge against the company as it did for Arthur Andersen, Enron’s accountant. The criminal charge was a death sentence for the accountant.
“There is an increased reluctance to bring criminal charges that ultimately have the effect of killing a company that otherwise employs a lot of innocent people and has lots of value to it,” says Michael Gass, an expert on SEC enforcement at Palmer & Dodge, a Boston law firm. “Instead, there is an increased focus on the individuals responsible.” READ MORE>>
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