In an effort to calm the harried investors in his latest target, American International Group Inc., New York AG (“Aspiring Governor”) the reigning Lord of Regulation Eliot Spitzer announced yesterday that his office expects to reach a civil settlement with AIG even as he rachets up the criminal investigation into several private entities closely tied to AIG’s business. Here are the previous posts on the developing AIG and Berkshire Hathaway debacle.
After being hammered for over a month, the price of AIG shares responded to the Lord’s announcement yesterday by increasing to $2.35, to $53.30 on the New York Stock Exchange. Even with yesterday’s spike, however, AIG shares are down 26% since the beginning of the Enronesque investigation into AIG’s finances. The seemingly bottomless drop in AIG’s share price is driven by the fact that no major financial company has survived criminal charges in the history of U.S. financial markets.
Meanwhile, seemingly just to make things more interesting, several senior AIG executives were fleeing the boards of C.V. Starr & Co. and Starr International Co,, two closely-owned AIG-associated entities, the former of which controls 12% of AIG’s stock. Former AIG chairman and CEO Maurice R. “Hank” Greenberg is the CEO of Starr International, which uses its stake in AIG to provide deferred-compensation to AIG executives. Inasmuch as the Lord of Regulation does not approve of Mr. Greenberg’s tentacles affecting AIG, the AIG board is scrambling to disassociate itself from the closely-owned entities and reassert control over AIG’s executive compensation program.
Given the Lord’s disapproval of AIG’s arrangement with Starr International, that the structure of the arrangement may actually benefit AIG shareholders does not appear to be a particularly important consideration at this time to the AIG board.