American International Group has finally closed the book on the turbulent Maurice “Hank” Greenberg era. On Thursday the embattled former chief executive officer and other defendants agreed to settle a derivative suit alleging that they fraudulently used various accounting tricks to mask problems at the company. Under the deal, which must be approved by Vice Chancellor Leo Strine Jr. of Delaware Chancery Court, AIG will receive $90 million. At the same time, Greenberg and former AIG Chief Financial Officer Howard Smith will be reimbursed $60 million for their legal fees. Both sums will be paid by AIG’s insurance carriers.
Greenberg’s attorney, Lee Wolosky of Boies, Schiller & Flexner, said he was pleased with the settlement and pointed out that his client isn’t paying a cent. “Hank Greenberg is very glad to be finished with all this litigation so he can return his full efforts to his business and philanthropic pursuits,” Wolosky said.
Plaintiffs lawyer Stuart Grant of Grant & Eisenhofer, however, offered a different spin. He stressed that the $90 million AIG is getting would have otherwise gone to Greenberg and the other defendants based on a 2009 settlement between AIG, Greenberg and Smith, under which AIG agreed to reimburse up to $150 million of their legal fees. “It’s technically true that Greenberg isn’t paying anything, but he gave up money and rights that were coming to him,” said Grant, who represents the Teachers’ Retirement System of Louisiana. “AIG is a winner here because they got money and obligations that they would not have received otherwise.”
Wolosky disagreed that his client was giving up his rights to $90 million and pointed out that AIG has a $200 million insurance policy for director and officer liability for cases like this. “At the end of the day, my client has paid not one penny to any parties represented by Mr. Grant,” he said. “In fact, Mr. Greenberg has received over $200 million in connection with this week’s settlement and last year’s settlement with AIG.”
Greenberg has been targeted in several suits since he left AIG in 2005. In 2008 Greenberg and other executives agreed to pay $115 million to settle a derivative suit alleging that AIG was overpaying C.V. Starr, a company headed by Greenberg. In 2009 Greenberg paid $16.5 million to settle an SEC complaint. A lawsuit initiated by former New York Attorney General Eliot Spitzer and taken over by his successor, Andrew Cuomo, is pending.
As for AIG, the company, like Greenberg, sounds ready to move on. “This settlement resolves longstanding shareholder derivative claims asserted on behalf of AIG against more than 20 current and former officers and directors, as well as insurance coverage issues,” said Mark Herr, vice president of media relations, in a statement. “We are pleased this matter has been satisfactorily resolved.”
Peter Harrar of Wolf Haldenstein Adler Freeman & Herz represented the other plaintiff in this case, the city of New Orleans. Harrar did not respond to a request for comment.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.