OFF THE PEDESTAL INTO REALITY

Rough Notes, May 2005 by Levy, Emanuel

Hank Greenberg's rise to power-and fall from grace-marked by impressive achievements

It has always seemed improbable that the legendary CEO of the American International Group, who, in 1967 took the company from more or less humble beginnings to the world's leading commercial insurer, would be finessed into retirement. But, the reality was front-page news on March 15, 2005, when Maurice "Hank" Greenberg succumbed to the evidently unyielding urging of the AIG independent directors, and resigned as CEO. This was in the face of persistent regulatory challenges, spearheaded by New York Attorney General Eliot Spitzer, with the sec looking on. In the cross hairs was the question of the legality of a financial product called "finite risk" and a transaction viewed as an attempt to disguise negative financial conditions.

Greenberg, who joined the company in 1960 and became chief executive officer in 1967, has been credited with creation of untold innovations and of building an organization that is acknowledged as the world's largest insurance group. And for personal achievements that elevated him to the top in insurance executive ranks. He was also known as a man of strong convictions and somewhat dictatorial mien. His management style was often considered intense, and perhaps excessive, because he seemed to be involved in every transaction including careful review of the quarterly financial statements. The success of AIG and the opportunities for expertise and advancement induced high numbers of highly talented people to join the company. The move was sound for them and for the company and it was also a means of upward mobility. The AIG alumni can now be found as high-ranking executives with a wide variety of other insurers.

Nearing the age of 80, Mr. Greenberg had not slowed his pace appreciably in fulfilling his obligations with AIG's farflung activities, as well as a wide range of public and governmental services with which he was engaged. He was invariably asked by the press about who his successor would be, as if he were a king. Invariably, he declined and would not even intimate the next in line. That prerogative was snatched from him on March 15, when he was told to clean out his desk. Actually, as it was widely and immediately reported, the mantle passed to Martin Sullivan, one of two chief operating officers for the company. The other is Donald Krank. Sullivan joined the company 30 years ago in London, while still a teenager.

For years, stories speculated on the fate of Mr. Greenberg's two sons, Jeffrey and Evan, both top AIG executives, until each decided to leave. It's an old story of thwarted ambitions where a father chains himself to the executive desk. In this instance it was not a familyowned business, even though dad had a lion's share of the stock.

Jeffrey, 53, left AIG in 1995 and after a short time became president of Marsh & McLennan, only to resign in mid-October 2004 when AG Spitzer launched his attack against "bid rigging" and contingent commissions. Spitzer not only succeeded in getting guilty pleas from some employees, he forced the major brokerage firms to renounce the practice of taking money from companies in addition to charging fees for service to their clients on the grounds that it constituted a conflict of interest. Marsh & McLennan was not the only brokerage firm involved and required to reimburse clients. Jeffrey's precipitous departure was said to have been engineered by the attorney general's office, and undoubtedly it was.

Evan Greenberg, 50, took his leave from AIG in 2000 and soon became chief executive of ACE Ltd. in Bermuda. Not unexpectedly, Spitzer in his current foray, zeroed in on that offshore company and in mid-March 2005 served it with 43 subpoenas and other investigatory documents, demanding vast quantities of data regarding its practices. But the company is also being pursued by the attorneys general of other states, the District of Columbia and many state insurance departments.

Given all this skein of dismaying accusations by Spitzer, which the elder Greenberg unequivocally disputed and was apparently ready to fight, it is distressing to see him forced into the role of helpless giant. The accomplishments of a lifetime, achieved through dedication, perseverance and brilliance that created untold innovations and advancements which served the interests of the insurance business and the public on all levels, are now blemished by Spitzer's attack. This is not to say that attorneys should be restrained from legitimate probing, nor that anyone should be immune regardless of age and stature. In the past few years, Spitzer, other AGs and the sec have shown their mettle and investigatory resolve, and many high-ranking executive gurus across the business and financial spectrum have found that there are limits to how far the rules may be bent. In many of the instances, the rules not only were bent, they were twisted into pretzels. The media have not been starved for scandals and rogues.