AIG's Ex-CEO Seeks Backing for Shareholder Revolt

Former American International Group Chief Executive Maurice “Hank” Greenberg is trying to drum up support for a shareholder revolt against the current management of his old firm, CNBC has learned.

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CNBC.com

Greenberg has been meeting in recent weeks with large shareholders of AIG and asking them to join his attempt to oust the leadership of the insurance giant.

So far, investors are listening to Greenberg’s pitch but have not agreed to join the effort, according to people familiar with the matter.

Greenberg, who was ousted two years ago amid an accounting scandal that led to billions of dollars of writedowns and regulatory penalties, threatened to lead a shareholder revolt in a recent filing with the Securities and Exchange Commission.

Greenberg has made no secret of his disdain for the current management of AIG and several of its board members, like Frank Zarb -- people he considers responsible for forcing him out of AIG after he built it into the world’s biggest insurance company.

Asked for comment, an AIG spokesman indicated after markets closed Monday that the company isn't taking Greenberg's actions lying down.

"It's important to remember two facts: First, AIG in federal court is challenging Greenberg's control of the AIG shares that SICO (privately held Starr International Co.) owns and has been aggressively selling," said AIG spokesman Chris Winans. "Second, AIG is the plaintiff in a lawsuit that seeks to recover billions of dollars lost because of deceptive accounting that AIG's regulators and outside auditors attribute directly to Greenberg."

Greenberg says these people folded to pressure from various regulators, including former New York Attorney General Eliot Spitzer. But AIG executives and board members say they had no choice but to ask Greenberg to resign after Spitzer threatened the firm with possible indictment if he remained at the firm.

Meanwhile, Greenberg believes AIG’s management hasn’t done an effective job since he’s left the top job at the company. As evidence, he points to AIG’s stock price, which has been slumbering in recent months, far below its high of $100 a share when Greenberg was chairman.

Greenberg is hoping investors agree that change at the top is needed.

In addition to contacting investors to pressure AIG to change its management, he has told friends that he might also mount a proxy fight to remove members of the AIG board and eventually AIG’s leadership, including its CEO Martin Sullivan.

A spokesman for Greenberg said: “We continue to talk to shareholders who are expressing interest.”

One problem Greenberg might have in getting enough shareholder support to demand a change in management is his own legal issues. Greenberg still faces civil fraud charges from Spitzer’s replacement as NY AG, Andrew Cuomo.

The SEC is also investigating Greenberg’s role in the alleged accounting fraud at AIG. Greenberg recently decided not to give a deposition to the SEC in the case, after saying he would testify.

And it looks like the SEC investigation is gaining momentum. Several months ago, Greenberg’s attorney said he did not receive a so-called Wells Notice, which is official notification that the SEC’s enforcement staff would recommend civil charges. But more recently, his attorney’s wouldn’t say whether Greenberg has received a Wells Notice, meaning the chances that he received one, or will receive one are increasing.