Shares bought for more than $50 worth less than 50 cents

Former AIG boss Maurice "Hank" Greenberg is suing AIG for securities fraud after shares he bought for $54.37 in January 2008 became worth just 42 cents, Reuters and Bloomberg report.

Greenberg, the insurer's largest individual shareholder, accused AIG of overstating its financial health and masking losses on credit default swaps that hedged default risk for at least $527bn of debt.

He said AIG's "material misrepresentations and omissions" had caused him to acquire shares as part of various deferred compensation plans at an inflated price, and later to lose nearly his entire investment after AIG's losses became known.

The lawsuit also named several individuals as defendants, including Greenberg's successor Martin Sullivan and Joseph Cassano, the former chief of AIG's financial products unit, which originated many of the credit default swaps.

AIG spokeswoman Christina Pretto said the lawsuit was without merit, and that the insurer would defend itself vigorously.

Reuters also carries an analysis of whether Greenberg was actually responsible for AIG’s problems. "The bottom line is that Hank Greenberg wandered out of the very safe, well-capitalized world of insurance into the surreal world of credit default swaps where you can create endless amount of risk," it quotes Christopher Whalen, co-founder of Institutional Risk Analytics, which provides analysis and ratings to banks.

The case is Greenberg v. AIG, U.S. District Court, Southern District of New York (Manhattan), No. 09-1885.