Does anyone else get the sense that NY attorney general Eliot Spitzer is becoming Captain Queeg-like in his pursuit of former American International Group CEO, Maurice “Hank” Greenberg?
The latest revelation in the Lord of Regulation’s relentless campaign against the former AIG executive Greenberg is the serious charge that Greenberg and other former AIG executives cheated the Greenberg-controlled charitable foundation — the Starr Foundation — through “self dealing” in the handling of the estate of AIG founder, Cornelius Vander Starr. Spitzer’s report on the matter contends that Greenberg’s self-dealing deprived the Starr Foundation of assets that “would now be worth more than $6 billion.”
Well now, those are serious charges. But a couple of small details were left out of Spitzer’s typically boisterous media release on the charges. First, the Internal Revenue Service, a New York state court and the New York attorney general’s office had previously approved the transactions that Spitzer now characterizes as improper “self-dealing.” But even more incredibly, Spitzer is complaining of allegedly fraudulent transactions that occurred 35 years ago!

Spitzer’s new allegations revolve around three 1970 transactions that followed Mr. Starr’s death in December 1968. Each of the transactions was designed to liquidate Mr. Starr’s holdings in private AIG-related companies with the proceeds to go to the Starr Foundation. Spitzer contends that Greenberg and the foundation’s other executors sold the foundation’s interest in two private companies — American International Underwriters Far East Inc. and C.V. Starr Co., a Bermuda-based insurance broker and underwriter — for a total of a little more than $2 million in 1970. Spitzer contends that those stakes were worth six times that much at the time.
Similarly, later that same year, Spitzer asserts that Greenberg and the foundation’s other executors sold Mr. Starr’s 20% stake in Starr International Co. — the investment vehicle long used to supplement the compensation of AIG executives — to for $3,000. Inasmuch as AIG had acquired Starr International’s assets for $100 million in stock earlier in 1970, Spitzer reasons that Mr. Starr’s 20% stake was really worth $20 million, not $3,000. In total, Spitzer contends that if the lost funds had remained invested invested in AIG shares that they would now be worth more than $6 billion, and that Greenberg and the Starr Foundation’s other AIG-related directors “had a fundamental conflict of interest because they controlled” the seller, the buyer and the beneficiary in regard to the transactions.
Oh, another little detail that Spitzer failed to mention is that the $6 billion in value to which Spitzer refers is largely attributable to Greenberg’s 35 year management of AIG, which Spitzer unceremoniously ended earlier this year.
Unfortunately for Spitzer, by 1979, the Internal Revenue Service, a New York court and the New York attorney general’s office all approved the Starr estate’s transactions to which Spitzer now complains. Moreover, the Starr Foundation president publicly denied Spitzer’s charges and, for their part, Greenberg and the three other living exectors of the Starr estate refuted the allegations and stated “each of us fulfilled our duty to Mr. Starr and the foundation without compensation and in accordance with his wishes and the law.” Indeed, Greenberg and the othrer directors point out that Mr. Starr himself set up and approved the transactions before his death, and that the transactions allowed the Starr Foundation to amass assets of more than $3 billion today, not including about $2 billion in donations disbursed over the years.
Never at a loss for a response to such seemingly salient points, Spitzer replied that Greenberg and the other executors at the time made false statements and key omissions upon which the previous IRS, NY AG, and court approvals were based.
So it goes in the wacky world of the Lord of Regulation.