Posted on December 16, 2005

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N.Y. Attorney General's Report Claims AIG CEO Defrauded Starr Foundation

A report filed by New York attorney general Eliot Spitzer contends that Maurice R. Greenberg, the former CEO of American International Group, defrauded the New York City-based Starr Foundation of millions of dollars more than thirty-five years ago, the New York Times reports.

According to Spitzer's report, Greenberg, who has chaired the foundation since 1981, unfairly enriched himself and other AIG executives in a series of transactions that violated the will of Cornelius Vander Starr, the company's founder, who left almost all his holdings to the foundation. The report further states that after Starr died in 1968, Greenberg and his colleagues, as executors of his estate, benefited by selling foundation assets valued at $30 million to companies they controlled for $2 million. Almost immediately, those executives turned around and sold the assets at far higher prices to AIG, which then set some of them aside for use as a compensation pool for the company's executives.

Most of the other Starr executors were also directors of the foundation, which by law could not own stakes in private companies. Greenberg and the three surviving former Starr executors — Houghton Freeman, John J. Roberts, and Ernest S. Stempel — maintain they have done nothing wrong and called the allegations outrageous. "The people of New York deserve an attorney general who is intent on fighting crime and solving the state's problems, not harassing its citizens and philanthropic organizations," the three men said in a joint statement. "Each of us fulfilled our duty to Mr. Starr and the foundation without compensation and in accordance with his wishes and the law. Our decisions were reviewed and approved nearly thirty years ago by Spitzer's own office, the Internal Revenue Service, and the New York State Surrogate's Court."

In addition to the report, Spitzer sent a letter to foundation president Florence A. Davis asking her to create a committee to evaluate possible remedies whereby the foundation could recover some of the funds the attorney general contends it should have received under Starr's will. Spitzer also asked that the foundation change its structure "to guarantee it the independence needed to advance its charitable mission into the future."

In a statement, Davis said, "While the Starr Foundation respects the authority of the attorney general to supervise charitable foundations and to investigate alleged improprieties, the foundation is concerned that allegations concerning a judicial proceeding closed more than twenty-five years ago and the negative publicity attendant thereto may adversely affect the value of the assets of the foundation, without discernable purpose."

Morgenson, Gretchen. “Report Says Ex-A.I.G. Chief Defrauded Foundation 35 Years Ago.” New York Times 12/15/05.

Primary Subject: Philanthropy and Voluntarism
Location(s): New York, New York City

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