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By Chad Bray Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Maurice R. "Hank" Greenberg and the New York Attorney General's office reached an oral agreement to settle a long-running lawsuit, but the deal was derailed by the near collapse of American International Group (AIG) in mid-September, a lawyer said Monday.
At a court hearing Monday, David Ellenhorn, a lawyer from New York Attorney General Andrew Cuomo's office, said Greenberg, AIG's former chairman, and his office were preparing to put the settlement on the record "the week AIG crashed."
"Mr. (David) Boies; Mr. Ellenhorn; Mr. (Eric) Corngold, my boss; we reached a settlement," Ellenhorn said. "It was leaked to the press that weekend."
Boies is one of Greenberg's lawyers, while Corngold is senior prosecutor in Cuomo's office. Monday's hearing was before New York Supreme Court Justice Charles E. Ramos in Manhattan, who is presiding.
Ellenhorn said AIG suddenly went from trading between $20 and $30 a share to between $2 to $1 a share around the time the sides had reached an agreement.
AIG, whose shares declined dramatically in mid-September before it received government help, reached an intraday low of $1.25 a share on Sept. 16, but didn't close below $2 a share until late last month. AIG's stock closed Monday at $1.70, up 10 cents a share, or about 6.3%.
"Unfortunately, that deal didn't happen," Ellenhorn said.
The Wall Street Journal, citing a person familiar with the matter, reported in its Sept. 6 editions that Greenberg could be fined at least $100 million as part of a settlement envisioned by Cuomo's office. The newspaper also reported a spokesman for Greenberg said there was no consideration being given to Greenberg paying $100 million. The story noted at the time that settlement talks could break down.
Ten days later, the U.S. government moved in to shore up AIG as it neared collapse. The rescue package was originally about $85 billion and has grown to $150 billion in government aid to the insurer.
During Monday's hearing, Nicholas A. Gravante Jr., one of Greenberg's lawyers, said no settlement was reached in the attorney general's case.
Speaking with reporters afterward, Gravante, of Boies, Schiller & Flexner LLP, declined additional comment.
Ellenhorn also declined to say why the deal collapsed.
The drop in AIG's stock price likely had an impact on Greenberg's personal wealth. According to a filing with the Securities and Exchange Commission, Greenberg directly owned about 12.9 million shares of the insurer as of Sept. 30. Those shares are now worth about $21 million. They were worth more than $802 million when the company hit its 52-week high last December.
Greenberg also owns a 24% stake in C.V. Starr & Co., which beneficially owned another 17.8 million AIG shares as of Sept. 30, and controls Starr International Co., AIG's largest shareholder. Starr International had more than 192 million AIG shares as of Oct. 24, according to an SEC filing.
In September, Greenberg and three other AIG executives agreed to pay $115 million to settle a separate lawsuit filed against him and others in Delaware. That lawsuit was over the relationship between AIG and C.V. Starr & Co., which Greenberg now heads as chairman and chief executive.
Cuomo inherited the case against Greenberg from his predecessor, former New York Attorney General Eliot Spitzer.
The attorney general's case against Greenberg grew out of a probe into the insurer's accounting. Greenberg retired from the insurer in 2005 amid accounting probes by the attorney general's office and other regulators.
Greenberg and another former executive facing civil charges in the attorney general's case have denied wrongdoing.
In 2006, AIG agreed to pay more than $1.6 billion to settle accounting fraud allegations by the attorney general's office and the Securities and Exchange Commission.
The insurer, in 2005, announced it would restate more than four years of its earnings and said, without naming Greenberg directly, that former executives at times were able to "circumvent internal controls over financial reporting."
-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com
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(END) Dow Jones Newswires
November 24, 2008 16:43 ET (21:43 GMT)

Publié le 24 novembre 2008 Copyright © 2008 Dowjones