Spitzer Says Greenberg Cheated Charity of $6 Billion Essay Example

Spitzer Says Greenberg Cheated Charity of $6 Billion Essay Example Spitzer Says Greenberg Cheated Charity of $6 Billion Essay Spitzer Says Greenberg Cheated Charity of $6 Billion Essay Dec. 14 (Bloomberg) New York Attorney General Eliot Spitzer said Maurice Hank Greenberg and other former American International Group Inc. executives exploited their authority 35 years ago, costing a charity set up by AIGs founder $6 billion.In a letter alerting the charity today, Spitzer said Greenberg, ousted as AIGs chief executive officer amid an accounting probe by Spitzer earlier this year, shortchanged the Starr Foundation when he was an executor of AIG founder Cornelius Vander Starrs estate in 1969 and 1970. Greenberg and the other former executors called the allegations outrageous and indicative of a pattern of abuse by the attorney general.Spitzer, who said he found incriminating evidence in documents Greenberg tried to keep secret during the accounting investigation, may be stepping up pressure as the 80-year-old seeks to rebuild his legacy as leader of the worlds largest insurer for almost 40 years. New York-based AIG has restated $3.9 billion of earnings and pledged to cooperate with regulators. Greenberg has said the corrections were driven by fear.The case against AIG has been personalized because the company has rolled over and Hank hasnt, said Phillip Phan, a finance professor at Rensselaer Polytechnic Institute in Troy, N.Y., who wrote Taking Back the Boardroom. Hank is a direct challenge to his attempt to clean up the industry.Spitzers letter, accompanied by a 26-page report on his investigation of the matter, said Greenberg and the other executors cheated the foundation by selling Vander Starrs assets at below-market prices to two private companies that they controlled. C.V. Starr ; Co. and Starr International Co., which still exist today, shared offices and executives with AIG, and in fact all the executors of Starrs were C.V. Starr directors.`Public Stink BombWere charitable assets of the foundation, as the residual beneficiary of the estate lost in a series of transactions orchestrated by the very fiduciaries obligated to protect the est ates interests? Spitzer wrote to Starr Foundation President Florence A. Davis, who used to be AIGs top lawyer.Greenberg and the other former executors called the latest allegations Spitzers attempt to justify his decision to pressure AIGs board, under threat of criminal indictment, to remove Greenberg as chairman and CEO. Spitzer, who accused AIG and Greenberg of fraud in a civil suit in May, announced he wouldnt pursue criminal charges against Greenberg last month.The attorney generals case against Hank Greenberg was disgraceful from the start, said billionaire Ken Langone, a co- defendant in Spitzers lawsuit against former New York Stock Exchange Chairman Richard Grasso. It now seems apparent that Mr. Spitzer is trying to shore up his sorry case and his flagging political reputation by lobbing what amounts to a public stink bomb.Court ApprovalGreenberg, Houghton Freeman, John Roberts and Ernest Stempel are the only executors still living today, according to C.V. Starr spokesman Ho ward Opinsky. Today they cited 25-year-old approvals from a former New York attorney general and the New York Surrogates Court inGreenberg, Houghton Freeman, John Roberts and Ernest Stempel are the only executors still living today, according to C.V. Starr spokesman Howard Opinsky. Today they cited 25-year-old approvals from a former New York attorney general and the New York Surrogates Court in defending the asset sales by Starrs estate. The executors had determined that they should get the approvals precisely because of their multiple roles.The conduct and attitude of the attorney general in his pursuit of these allegations reflects a pattern of abuse and bad faith adopted toward Mr. Greenberg from the beginning of the investigation of AIG, they said in more than 35 pages of written response to Spitzers allegations.Spitzer urged the foundation to appoint an independent committee to evaluate remedies, though Greenberg, who now runs C.V. Starr and Starr International as investment c ompanies, is also chairman of the charity.Negative PublicityOpinsky said the Starr Foundation issued a statement today defending the transactions, though calls to Courtney OMalley, a vice president at the foundation, and the firms main number werent returned.While the Starr Foundation respects the authority of the Attorney General to supervise charitable foundations, and to investigate alleged improprieties, the Foundation is concerned that allegations concerning a judicial proceeding closed more than 25 years ago and the negative publicity attendant thereto may adversely affect the value of the assets of the Foundation, without discernable purpose, according to an emailed statement that Opinsky said the foundation provided.Spitzers report contends the foundation, which has $3.5 billion in assets, would have accrued another $6 billion over the past 35 years had it not been underpaid in three separate estate transactions following Starrs death in 1968. To make matters worse, C.V. Sta rr and Starr International sold the same assets to AIG at far higher prices shortly thereafter, Spitzer said.AIG SharesIn one transaction, for example, Spitzer said the executors knew the estates 48 percent stake in American International Underwriters Far East Inc. was worth far more than book value because one of them was the president of Far East.The estate got cash that would be worth $17.6 million today, he said. Instead, it should have received AIG stock that would be worth $1.2 billion today.Spitzer, who oversees nonprofits and charitable foundations, said the foundation may have claim to AIG stock held by Starr International. The firm, which distributed deferred compensation to AIG executives for decades, is in a legal battle with AIG to keep control of more than $19 billion of the companys shares. AIG spokesman Chris Winans declined to comment.Spitzer said Greenberg and his lawyers misrepresented the transactions to the former attorney general and to the court. There is no s tatute of limitations if the foundation chooses to try to recover the money, Spitzer spokesman Marc Violette said, declining to say what action the attorney general might take.The Starr Foundation makes charitable grants in education, medicine and public policy.(Article appeared in bloomberg.com on Dec. 14th, 2005)http://quote.bloomberg.com/apps/news?pid=10000006;sid=asSTBnA7L7gA;refer=home#Bloomberg Article AnalyisThis article, entitled Spitzer Says Greenberg Cheated Charity of $6 Billion (Update4) appeared on bloomberg.com on December 14, 2005.   In this article, it is discussed how New York Attorney General Eliot Spitzer recently issued a letter to the Starr Foundation, a charity set up in conjunction with the American International Group, Inc.s (AIGs) founder Cornelius Vander Starrs estate, stating that Maurice Hank Greenberg and other former American International Group Inc. executives committed wrongful acts thirty-five years ago, resulting in a monetary loss to the charity in the amount of six   billion dollars.   Greenberg was AIGs former chief executive officer, and the executor of the estate, who was ousted from his CEO position amidst an accounting investigation.Namely, Spitzer alleges that these individuals sold shares of AIG stock owned by the charity in three separate transactions for far less than these stock shares were worth.   These shares were sold to C.V. Starr ; Co. and Starr International Co., who still exist today, share executives with AIG, and all of the directors of these companies were executors of Starrs estate.   These shares were sold by these corporations back to AIG at a much higher price shortly thereafter.As agents and fiduciaries of Starrs estate and the foundation, the executives had a duty to act in the best interest of them.   They also had a duty to reveal any conflicts of interest, and not to profit at the expense of the estate and foundation.  Ã‚   Furthermore, they were directors and officers of AIG, who made a profit for C.V. Starr ; Co. and Starr International Co. at the expense of AIG.   This was another conflict of interest at the expense of AIG shareholders.   As AIG insiders, the executors knew the actual value of the shares and chose to sell them at a lesser price to divert value from the charity to these other corporations.   Furthermore, the foundation may now have claim to some of the shares held by Starr International.   These executors are also agents and fiduciaries of Starr International, who may have ultimately harmed Starr Internationals well-being by their wrongful acts.