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Stock Transfer
More on the commonality of Power and self dealing
Date: 5/27/2005 2:17:42 PM ( 19 y ) ... viewed 1378 times Plaintiff Asks Court to Rescind Greenberg's Transfer of A.I.G. Stock to Wife
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By GRETCHEN MORGENSON
Published: May 27, 2005
Jim Petro, the Ohio attorney general and lead plaintiff in a securities class action against the American International Group, yesterday asked the judge overseeing the matter to order Maurice R. Greenberg to rescind his recent transfer of 41.4 million A.I.G. shares to his wife, Corinne Greenberg.
The March 11 transfer of shares, worth more than $2.6 billion at the time, was fraudulent, Mr. Petro said in his complaint, which also asks the court to appoint a receiver to hold the shares until the class-action case has concluded. The gift was improper under a New York State law, Mr. Petro contended, because it shifted assets out of Mr. Greenberg's hands that investors could use to recover money they lost in A.I.G. shares.
Mr. Petro represents three Ohio public pension funds that hold A.I.G. shares, and is the lead plaintiff in a securities class action against A.I.G. that was consolidated with eight other such cases on Feb. 7. In April, Mr. Petro added Mr. Greenberg as a defendant in the class action.
"We are seeking to stop this suspect transaction of a large block of stock and put it under the control of a receiver until the end of the case," Mr. Petro said in a statement.
He added that the complaint filed yesterday represented "a new chapter in our vigorous efforts to obtain compensation for investors as well as to institute appropriate corporate governance reforms at A.I.G."
The three funds - the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio and the Ohio Police and Fire Pension Fund - have lost $72.6 million on their A.I.G. holdings. Assets in the three funds, which invest for the benefit of more than a million current and former Ohio workers, total $128 billion.
A spokesman for Mr. Greenberg declined to comment on the complaint.
Shares of A.I.G. have plummeted 24 percent since the company's disclosure in mid-February that it had received subpoenas from the office of Eliot Spitzer, the New York attorney general, relating to its use of nontraditional insurance products that may have artificially enhanced its financial results. Earlier this month, A.I.G. disclosed that its accounting had indeed been improper and that correcting it would reduce its net worth by $2.7 billion.
Yesterday, Mr. Spitzer filed a civil suit against A.I.G., Mr. Greenberg and Howard I. Smith, the company's former chief financial officer, saying that the executives and the company had engaged in misleading accounting for the last 20 years, if not longer.
The Ohio attorney general filed yesterday's complaint under a New York statute relating to fraudulent conveyance, a situation in which assets that may be needed to satisfy a judgment are transferred improperly and therefore made inaccessible to creditors. Judge Miriam Goldman Cedarbaum in Federal District Court in New York is overseeing the class action against A.I.G.
According to filings made in April with the Securities and Exchange Commission, Mr. Greenberg transferred 41.4 million A.I.G. shares as a gift to his wife on March 11, less than a week before he was scheduled to testify before federal and state regulators. On March 14, Mr. Greenberg resigned under pressure as chief executive of A.I.G.
A lawyer for Mr. Petro said that asking the court to rescind the gift of A.I.G. shares now, at the beginning of the action, was more efficient than waiting until the case concludes.
If the judge agrees to unwind the gift and appoints a receiver, the shares will be available as a sort of security deposit for the investors to recover some of their losses should they win their case. If they do not prevail in court, the shares would go back to Mrs. Greenberg.
But if the gift is allowed to stand and investors prevail against A.I.G. and Mr. Greenberg, they would be forced to pursue his wife to recover the shares she received.
Asking a court to unwind such a transaction is somewhat unusual for a plaintiff, and at least one such request - in an Enron class action - was recently denied by the court.
But the facts of the Enron situation were different from that of A.I.G., according to Thomas A. Dubbs, a partner at Goodkind Labaton Rudoff & Sucharow in New York, who is lead counsel for the Ohio pension funds.
"In Enron, the plaintiffs were unsuccessful in their attempt to freeze the trading profits of the insiders because there was no actual dissipation of assets," Mr. Dubbs said. "In this case, by contrast, there was an actual, sizable and suspicious transfer of stock. Plus, there is a specific remedy available to the shareholders under New York law."
9th- See previous AIG prosecution posting.
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