Fallen Giant by Ron Shelp, Al Ehr-Bar --- Hank Greenberg and The History of AIG

Fallen Giant 

By
Ron Shelp with Al Ehr Bar
@ 2006, 2009

Review

Sampson I.M Onwuka

Hank Greenberg's recent book may be originated as a reaction to the Fallen Giant. The book does not place Greenberg at the center of the history of AIG but proves him instrumental in transforming the company and the lives of those who came under his canopy and administrative genius at AIG. It is common sense that books this nature forcing the history of AIG to weigh against the earliest years in Shanghai may likely explain the heavy edited 'The AIG Story' by Hank Greenberg.

According to the Fallen Giant, that “On March 14, 2005, Hank Greenberg fell from this aerie of leadership in business, politics, non-profits. Ironically, he was suddenly elevated to national even international, prominence that had long-eluded him and been a real frustration, probably because he had an insurance company instead of an industrial company, an entertainment conglomerate, or a bank." It may not seem that a light on such a long career is well witnessed, but it seems that the individual efforts made by CEOs in certain industries received less light and perhaps exposure than others in others such as Insurance.

In truth the consequence of certain leadership is the failure to highlight their importance. A failure that may be seen from separate angle, that some of the actions and events at the latter half of the whole story buries the strident effort put up by AIG to advance the interest on shareholders. It is not impossible to suggest that Ron Shelp and Al EhrBar may have summarized their position in the context of several questions, that

(1) “Why would Hank Greenberg, one of the most successful CEO’s ever, nearly 80 years old and already a billionaire several times over, allegedly risk his reputation and potentially even his freedom over what turns out to be fairly modest “fiddling” with A.I.G reported earnings?”

(2) “Why did AIG’s outside directors, each of them flattered to be hand-picked by Greenberg to serve on one of the most illustrious boards ever, turn to him so quickly and force him out in such a humiliating way?”

(3) “Why did Eliot Spitzer go after Greenberg with such incredible zeal, labeling him a criminal on national TV before he had been charged with anything – and then never charge him with a crime? Would this be the ultimate victory?”

Some of C.V Starr compatriots - Houghton Freeman, Sorbanes - Oxley, Enron, Worldcom (General Re), Stare foundation, Council on foreign Relations, Richard Holbrooke, NASDAQ president Frank Zarb, former defense secretary - William S. Cohen, attract some degree of exposure and in their career all else, that there is something more important than the theory of general consumptive behavior to investment attitude, especially in the case of China and perhaps India in their adoption and re-entry into World Trade Organization.

There are foundation differences between these two books, but the later explicate the defensive persuasion on the authority. In difference with this theory, we can suggest that one great hall marks of any product is enduring sense of vista, I for one can suggest that a sense of narrative in Ron Shelp, Al Ehr-Bar is far more compellingly and defensive of Hank Greenberg than Hank Greenberg and the AIG Story.  We may state for the record that the AIG Story contain certain information that the Fallen Giant did not spare, that the account by Fallen Giant may throw light perhaps throw light on perhaps the whole story - especially why and how it matters most for corporate Americans.

Whereas the AIG Story narrates the actions taken by the State of New York and Eliot Spitzer as necessarily responsible for the lack of leadership qualities towards the end of AIG, the Fallen Giant did not fail to throw light on the subject, it affirmed the story - but differently, that,"...Spitzer, SEC, and Insurance regulatory investigations that for many months seemed to compound exponentially, with new investigations and lawsuits on almost a daily basis. Two weeks after Greenberg resigned as CEO, files were removed from AIG office in Bermuda and Spitzer threatened criminal action against AIG.”

On Dec 5th 2005, Spitzer charged Greenberg for defrauding the Starr Foundation and on October 17th SICO – counter sues AIG defending ownership of shares following the SICO attempt $20 billion worth of shares possession. 1999 AIG made a splash by purchasing (Sun America) and the insurance company franchised out of Europe and Eastern Europe following the fall of the curtain and within the interim years AIG ended up acquiring life insurance policy by China.

The end of Hank Greenberg’s career stint at AIG was 2006 beginning in 2005 March 14th, allowing to make the transition of AIG – especially in transition. The Resignation itself was not unexpected - but how the resignation resonated to all Americans was for all intent of purpose a question of that decade.

We can also summarize that the role of Elliot Spitzer, AIG and C.V Starr. 1999 AIG made a splash by purchasing (Sun America) and the insurance company franchised out of Europe and Eastern Europe following the fall of the iron curtain and within the interim years AIG ended up acquiring life insurance policy by China. The Author's counted backwards that "It is based on the merits of the case and what strike me as fair. First, it is clear SICO legally owns the stock. It is a private company and has an unquestionable ownership. The original $110 million set aside has grown to a staggering $20 billion in a little 30 years”

If AIG had separate long term compensation one respected attorney asked – “How is it that an AIG executive can also work for one or two private companies (C.V Starr and Starr International) that do business with AIG where he gets paid by both or all three and there is not a conflict of interest? And how come we report all this to the SEC in our 10k and no questions are asked? That never changed until the crisis that led to Greenberg’s ouster”, that the offer was $600 million short of Greenberg’s expectations “But on a de facto basis, AIG and SICO were treated as one entity when Greenberg was head of both. One AIG director commented; “Hank saw it all as one big pot – AIG, C.V Starr, SICO.” Berkshire Hathaway and Ace Ltd…, The AIG suit accuses the Starr agencies of “flagrant misconduct and self-dealing contrary to the best interest of AIG.”

The book added that, "In February 2006, AIG challenged SICO in court to give it details of its sales of AIG shares and its plans for future stock sales as the companies continue their messy divorce. This was in reaction to the fact that Starr had sold about 2 million of the 311 million shares it holds. Starr indicated it is willing to turn over information about its sales and the disposition of these shares. In a letter to the presiding judge, Starr International said it intends to continue selling AIG shares and will use those proceeds for general corporate purposes, including re-investment.”

Short view

Although a case for Hank Greenberg can be advocated in the light of his actions during the turn of 70's, that for instance, "When the Shah fled in 1979, AIG's vice president for the Middle East happened to be there at the time and was caught in Iran for three weeks before getting a flight out just before Ayatollah Khomeni returned. Shadow wasn't so lucky. The Ayatollah government seized AIG's assets and threw him in jail." and 80's, especially in bringing Communism back to the common market, took personal change for releasing - Shabani from jail and getting out of Iran, engaged ILFC - International lease finance corporation and under the auspices of SICO  - instrumental in creating the Sarbanes - Oxley laws, he was indirectly affiliated with creating and facilitating Enron, WorldCom, etc., two American Giants that eventually collapsed within a sprain of years. The totem issue may be seen from the 9/11/2001 collapse of world trade center, or that the investors in conditions similar to the pyramid scams of Madoff shunted between the new facility of (a) Deferred Compensation Profit Participation plan (DCPPP) and SICO - Starr International which was the more parent foundation. In a shy rear-view of the competency of DCPPP in netting some of the payout to workers and shareholder, a foundation that owns a fat tail of a brightened company struggle with duration and settlement pattern for its members. This case was not that simple, the incident may have ended the insurance package for many companies in Europe, and it was common place for the actions taken by several Premiums based Insurance companies that seem to falsify short term value or quotes for long term market based investment function or derivative. An example of DCPPP based derivative is Prudential and the 'Serpent on the Rock' that eluded the rest of us when long term view, but filed for bankruptcy within a matter of weeks. A derivative upon the existing shareholders is based on debts - usually a product of merger and acquisition leading to a balance sheet problem of future returns and sometimes deferred payment (preferred shares/debentures) suffer from the problem of liquidity. If there is any reason why Enron, WorldCom, and several auto-industries failed in the 2000s, it was the false bias of over-stated return. Many of these corporations - including Lehman were affiliated directly with AIG.