In response to lawsuit, AIG blames former boss for crisis
AIG has said its former chief executive Maurice "Hank" Greenberg was "directly responsible" for the creation of financial products that led to the company's near collapse, Dow Jones reports.
Responding to a law suite filed by Greenberg against AIG, the battered insurer said it was "utterly without merit."
"It strains common sense to accept Greenberg's allegations that he was misled or did not appreciate the risks from the multisector CDS book written by AIG," the company said.
The report quuotes Liz Bowyer, a spokeswoman for Greenberg, saying, "These attacks on Mr. Greenberg are apparently designed to deflect attention from AIG's disastrous performance since Mr. Greenberg retired four years ago, and to distract attention from its wasteful use of shareholder and taxpayer funds since that time."
Bowyer said the losses at AIG in 2007 and 2008 resulted from a shift in the way the financial products unit did business, reportedly writing as many CDSs on collateralised debt obligations in the nine months after Greenberg's departure as it had written in the previous seven years, with a majority of those exposed to subprime mortgages.
"Moreover, the risk controls that Mr. Greenberg and his team put in place reportedly were weakened or removed after his retirement, and the massive additional exposure in AIGFP was apparently not hedged," she added.
Greenberg told Fox Business Tuesday that under his leadership, AIG carefully limited its exposure in credit default swaps.
He also said he's suing AIG because its managers failed to disclose in 2007 that outside auditors had uncovered what he called "material problems" in AIG's accounting. Unaware of the problems, he exercised options to buy AIG stock, he added.
In response to the suit, filed Friday in federal court in New York, the company said Greenberg led the creation of AIG's financial products unit, its compensation structure and its businesses, including the book of CDSs.
"When he left AIG after saying he could not rule out invoking his Fifth Amendment rights against self-incrimination before a regulatory inquiry," the CDS book was about $40 billion "and he knew that these swaps were not hedged," AIG said.
