Ex-CEO Greenberg sues AIG, alleges fraud

By Jonathan Stempel

NEW YORK (Reuters) - American International Group Inc, whose $61.66 billion fourth-quarter loss was the largest ever for a U.S. company, was sued for securities fraud by former Chief Executive Maurice "Hank" Greenberg.

Greenberg, the insurer's largest individual shareholder, accused AIG of overstating its financial health and masking losses on credit default swaps that hedged default risk for at least $527 billion of debt.

He said AIG's "material misrepresentations and omissions" caused him to acquire shares as part of various deferred compensation plans at an inflated price, and later to lose nearly his entire investment after AIG's losses became known.

AIG shares closed at $54.37 on January 30, 2008, the date that Greenberg said he acquired AIG shares through the deferred compensation plans. The shares closed Monday at 42 cents, unchanged on the New York Stock Exchange.

Greenberg is seeking the difference between what he paid for the shares and what he said the shares were worth, as well as reimbursement of more than $70 million of taxes.

The lawsuit also named several individuals as defendants, including Greenberg's successor Martin Sullivan and Joseph Cassano, the former chief of AIG's financial products unit, which originated many of the credit default swaps.

An AIG spokesman said the company was reviewing the lawsuit and planned to issue a statement. Sullivan and Cassano did not immediately return calls to their homes seeking comment.

Greenberg ran AIG for nearly four decades before being ousted in March 2005, when New York Attorney General Eliot Spitzer investigated transactions involving the insurer.