Former AIG Boss Pleads Fifth

Maurice Greenberg, known to most of his pals as "Hank," resigned recently from American International Group, the insurance giant he built. At 79, the former CEO of this multi-billion dollar company should be enjoying his new retirement. Instead, he spend part of yesterday appearing before regulators with his legal advisers invoking his rights under the Fifth Amendment to the constitution against self-incrimination.

On Monday, Warren Buffet (the second richest man in America) testified in response to a subpoena. The New York State Insurance Department is investigating a deal between Mr. Buffet's General Re (a reinsurance subsidiary of his main unit Berkshire Hathaway, NYSE: BRKA, which trades around $88,000 a share) and AIG. The government is concerned that the deal boosted AIG's reserves of cash and deceived investors and analysts as well as regulators into believing AIG was financially stronger than it really was. Joseph Fritsch, the director of the state insurance department, claimed Mr. Buffet said, "that Hank knew all about the deal."

While one doubts whether the state insurance director should be discussing an investigation with the press, such testimony puts Mr. Greenberg under close scrutiny. In cases like this, the CEO normally says that his underlings did it all, that the company is too big for him to keep an eye on all the details, that these things happen, etc. However, if Mr. Greenberg is to pursue that defense, he has to call Warren Buffet a liar. That is contrary to the reputation Mr. Buffet has created over the years and very self-serving. That dog won't hunt.

According to David Boies, Mr. Greenberg's lawyer and Al Gore's election attorney, there are other transactions the investigators want to talk about, and many of them go back a few years. He, reasonably, asked for more time to go over things with his client, but the government fishing trip went ahead. Mr. Fritsch says there are 40 pages of questions they want answered, so Mr. Greenberg stood on his Fifth Amendment rights rather than open the can of worms at this stage.

Mr. Greenberg said, "I am willing to take responsibility and to account for the performance of my duties, but I believe that good order and fairness require that I have an adequate opportunity to be advised of the issues to be investigated and to my alleged involvement therein." No truer words have been spoken. But after he has had time to examine the matters at hand, things promise to become sticky.


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