Coulda, Woulda, Shoulda: Greenberg and AIG

(MoneyWatch)  To those in the know, former American International Group (AIG) Chief Executive Maurice (Hank) Greenberg's testimony before the House Oversight and Government Reform Committee meeting today wasn't a boffo performance.

Greenberg plays the innocent quite well, a function of excellent media training and good lawyering, and he loves to point the finger at everyone else, such as Goldman Sachs and other AIG counterparties who got billions during the $170 billion taxpayer bailout.

But the former CEO carries a lot of baggage. Greenberg, who was in charge of AIG for 38 years, rustled up the gang of London cowboys who smoked the giant insurer to the tune of $2 trillion in credit default swaps and then left taxpayers to foot the bill.
The biggest irony is that he almost regained the catbird seat at AIG in 2007, in which case he wouldn't be throwing tomatoes at his successors, former CEO's Martin Sullivan and Robert Willumstad and current CEO Edward Liddy. He'd be the one ducking.

Here's the scoop. In March 2005 Greenberg was forced out as chairman and chief executive after then New York Attorney General Eliot Spitzer accused him of cooking the books. Civil charges are still pending.

Greenberg, who boasts that he stormed the beach at Omaha, didn't give up. After numerous lawsuits, Hank announced in a federal filing in November, 2007 that he was "seeking strategic alternatives" for his former company.

Wall Street saw this as a takeover. If Greenberg, who still retains 12 percent of AIG's shares on his own and through companies he controls, could find a partner, he might be able to take the world's largest insurer back. And Hank was close to several Chinese sovereign funds with deep pockets.

Then in January 2008, the former soldier retreated. He said he didn't plan to solicit proxies, buy more AIG shares, or start a tender offer for the company. Greenberg had been taken to the woodshed by New York Insurance Superintendent Eric Dinallo, who said Hank had violated state law because he hadn't sought state permission to retake control of AIG.

Dinallo, a former lead attorney under Spitzer, may also have been skeptical about Greenberg because Greenberg was an alleged co-conspirator in a federal case against five insurance executives charged with dummying up a transaction to make AIG look better. They were subsequently convicted.

As it turns out, Dinallo may have done Greenberg the biggest favor of his life. When the AIG scandal broke in February 2008, only a month later, Hank was safely on the sidelines, able to criticize the floundering leadership at his former company without having to face the music.

Greenberg's only problem: his huge stake in the company dwindled from billions of dollars to millions, according to Forbes magazine, and he's no longer on their billionaires list.