Word: greenbergs
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...trust-me CEO took another bullet last week, when American International Group (AIG) fessed up to improper bookkeeping in a deal with a unit of Warren Buffett's Berkshire Hathaway. AIG severed ties with its iconic former CEO Maurice (Hank) Greenberg. But it is Greenberg's link to the even more lionized Buffett that's causing the biggest stir...
...wipe away easily. As reported first in TIME, Buffett has been summoned to speak with regulators. He is scheduled to meet in New York on April 11 with representatives from the Securities and Exchange Commission (SEC), the Justice Department and the New York attorney general's office. Greenberg is set to be deposed the next day. "The stakes are high for anyone even superficially attached to the AIG transactions," says Christopher Bebel, a Houston securities lawyer and former federal prosecutor. "This is how things are today. It's hardball." After all, prosecutors aggressively hunted down the banks that devised...
...insurance muck throws a spotlight on the industry and has rekindled the debate over whether insurance companies need federal oversight. Regulation of the industry rests mainly with the states, which are short on resources--a condition that may have allowed abuses to incubate. Insurer Marsh & McLennan, formerly run by Greenberg's son Jeffrey, agreed to pay $850 million to settle civil fraud charges earlier this year. Others being probed include Chubb, Swiss Reinsurance...
That's not to say there's nothing wrong with what AIG is alleged to have done. "Jiggling the numbers may have become commonplace, but that doesn't mean it's legal," Spitzer says. And if Greenberg misled investors intentionally, it would be fraud. But most believe he was swallowed by the shifting sand. Ethical lapses that regulators all but ignored yesterday now get their full attention--which should give executives everywhere pause. Even squeaky-clean Warren Buffett, whose Berkshire Hathaway owns Gen Re, has been sullied. Buffett is not under investigation, but TIME has learned he will be interviewed...
...Spitzer's playbook, the SEC intends to launch more probes of suspicious practices even if they are widely used and have "no clear road map to wrongdoing," Stephen Cutler, head of the enforcement division, has said. Next up may be radio, where Spitzer is looking into kickbacks for airtime. Greenberg, meanwhile, is still worth $3.2 billion, according to Forbes, and for now remains at AIG as chairman. But "the most powerful executive in the history of insurance is no longer CEO of his company," says analyst Andrew Kligerman at UBS. "That sends a very clear message." "Everybody does...