Starr’s CEO and chairman decries the breadth of New York State’s prosecutorial powers.
GREENBERG SETTLES CASE WITH NEW YORK AG AFTER
12-YEAR FIGHT BY DAN REYNOLDS
Aig’s former chairman and CEO Hank Greenberg and former CFO Howard Smith settled a civil accounting
fraud case in February that spanned
12 years, stretching back to the
administration of former New York
State Attorney General Eliot Spitzer.
In settling the case with current
NY AG Eric Schneiderman,
Greenberg and Smith agreed to
payments totaling $9.9 million; $9
million on the part of Greenberg and
$900,000 on the part of Smith. In the
settlement, there was no admission of
wrongdoing on the part of Greenberg,
now the chairman and CEO of the
Starr Cos., or Smith.
In a statement released Feb. 9, the
N. Y. Attorney General’s office said
the $9.9 million represented bonus
payments Greenberg and Smith
received from 2001 to 2004.
Despite the terms of the mediated
settlement, the AG’s statement implied
that the agreement amounted to an
admission of fraud by Greenberg and
Both men strongly dispute that
characterization of the settlement.
At a press conference in New York
on Feb. 13, Greenberg’s attorney
David Boies, described the payments
as nothing more than a “nuisance
settlement,” given the fact that the NY
AG’s office had originally sought some
$5 billion in damages.
In all, the civil actions initiated
by Spitzer in 2005 amounted to nine
One of the last two actions to reach
settlement related to a loss portfolio
that AIG received as a reinsurer
from Berkshire Hathaway subsidiary
Cologne Re Dublin in the fourth
quarter of 2000. Unbeknownst to
Greenberg and other executives at
AIG, a portion of the portfolio had
already been reinsured elsewhere.
Thus, AIG’s acceptance of the
portfolio resulted in an erroneous
increase in its loss reserves, since the
transaction involved little or no actual
risk. An innocent accounting error
that they were not aware of, not fraud,
Greenberg, Smith and their attorneys
The second case involved
allegations that AIG attempted
to confuse investors by equating
underwriting losses with investment
Under pressure from Spitzer,
Greenberg was forced out as chairman
and CEO of AIG in 2005, after 40
years with the company.
At the time of Greenberg’s forced
resignation, AIG had a presence in
more than 130 countries and $180
billion in market capitalization. Three
years after Greenberg’s removal,
the company’s insurance of credit
default swaps resulted in an almost
catastrophic failure. The rest is,
AIG required a government
bailout, which it has since paid back;
but it had to sell off key assets to do so.
Greenberg is pursuing a defamation
case against Spitzer for comments
Spitzer made about him after leaving
the AG’s office in 2006. &
COMPANIES ILL-PREPARED FOR CYBER ATTACKS
BY JODI SPIEGEL ARTHUR
Companies plan to boost spending on cyber security to deal with an onslaught of cyber
Despite a barrage of cyber attacks on businesses in the U.S. and abroad — with American firms targeted most often —
more than half are ill-prepared to deal
with the threat, according to a survey
by specialty insurer Hiscox.
Cyber crime cost the global
economy more than $450 billion in
2016, Hiscox said.
The findings show 72 percent
of U.S. firms with 250 or more
employees, and 68 percent of smaller
American companies experienced a
cyber incident within the past year.
Martin J. Frappolli, senior director
of knowledge resources for The
Institutes, said many organizations
don’t fully recognize that “first party
risks are just as big as third party risks
and more common sources of lost
In the “Hiscox Cyber Readiness
Report 2017,” U.S. firms reported
their top cyber security challenges
were the changing nature of threats,
both internal and external.
To deal with them, 63 percent
plan to increase spending on cyber
security over the next year with the
most money invested in technology,
followed by training, cyber security,
security staffing and outsourcing.
Many plan to buy cyber insurance.
Technology is the top
investment despite being where most
firms appear to be best prepared.
“This isn’t necessarily about
throwing money at technology.
“It’s about having a well-rounded
strategy, process and resources,” said
Dan Burke, vice president and cyber
product head at Hiscox USA. “This
is a human problem as much as it is a
Training employees to recognize
potential threats, such as phishing
scams in emails, and having strong
password management can go a long
way toward cyber security, he said.
Seven out of 10 respondents say
training has reduced the number of
Emily Cummins, a RIMS board
member and managing director
of tax and risk management at the
National Rifle Association, is a strong
proponent of employee cyber risk
“The No. 1 recommendation is
always continuous training,” she said.
“And that means year-round
reinforcement because employees are
a source of unintentional errors and
training can prevent [breaches].”
Most respondents listed cyber
insurance as a key priority, with 57
percent saying they intend to purchase
or enhance cyber insurance coverage
“Use the whole toolbox,” Frappolli
said. “Don’t just think, ‘I want to buy
insurance,’ and I’m done.”
The survey questioned cyber
security experts at 1,000 companies. &
Hank Greenberg, CEO and
chairman, Starr Cos.; former
AIG CEO and chairman
Martin J. Frappolli, senior director of
knowledge resources, The Institutes/Risk
and Insurance Knowledge Group, and Emily
Cummins, managing director of tax and risk
management, National Rifle Association