Once again, the team of politicians and corporate bureaucrats pursuing the witchhunt against former American International Group CEO Maurice “Hank” Greenberg have struck out. Or maybe the better baseball analogy would be that they hit another ball into foul territory.
Greenberg, who built AIG into a financial services powerhouse during the 35-plus years he served as its head, won another legal round Tuesday as a federal jury in New York City ruled that he did not have to reimburse AIG for shares taken by an investment firm Greenberg owned when he was forced out as CEO. The jury found that the shares belonged to Greenberg’s company, Starr International, under terms of the original contract.
Yet outrageously, it appears that AIG will continue to use the billions in taxpayer dollars it has receive to pursue this frivoulous litigation against Greenberg. The jury’s verdict today is the latest piece of evidence that much of AIG’s problems — and the systemic disruptions they have caused — can be traced to political meddling.
Greenberg, a distinguished philanthropist and Bronze Star recipient for his service in World War II and the Korean War, was forced out in 2005 because of baseless charges of accounting fraud by then-New York Attorney General Eliot Spitzer. All of Spitzer’s criminal charges against Greenberg and nearly all of his civil charges have been dismissed, but the mere allegations were enough to cause AIG’s board to force Greenberg out and to be replaced with a succession of caretaker CEOs more pleasing to politicians like Spitzer.
The sudden forced exit of Grenberg took its toll. Greenberg has testified that as many mortgage-related credit default swaps were written in the nine months following his departure as AIG had issued in the entire previous 7 years combined. No one has refuted him on these specifics. We will never know what would have happened had Greenberg stayed on as CEO, but given his track record, it is doubtful the implosion would have been so sudden and so severe.
In sum the lesson of AIG is not that there should be more government meddling, but less arbitrary intervention by subprime politicians.
(Greenberg is not to be confused with the late baseball legend Hank Greenberg, from whom he probably took his nickname. But this did allow me to use many baseball analogies in this blog, so I’m grateful.)