Ex-AIG Chief Target of Stock Probe

Federal and state prosecutors are investigating whether Maurice Greenberg, the ousted chief executive of American International Group Inc., tried to prop up the insurer’s stock price in the weeks before an accounting probe forced him out, people familiar with the matter said Friday.

Prosecutors for the Manhattan U.S. attorney’s office and New York Atty. Gen. Eliot Spitzer are examining whether Greenberg, 80, ordered an executive in AIG’s trading group to buy shares as the price was falling, said the people, who declined to be identified. Shares of the world’s largest insurer have dropped 26% since subpoenas were disclosed Feb. 14, one month before Greenberg stepped down.

The stock price investigation adds to probes of Greenberg’s role in accounting errors that inflated the company’s net worth by about $2.7 billion. New York-based AIG said former senior managers had skirted financial controls to order changes to the company’s books, and Spitzer said last month that he might pursue a civil or criminal case against Greenberg.

The unidentified executive in the trading group told AIG last week that he spoke with Greenberg about the company’s stock price, the people said. The conversations were captured by a recording system used by the trading unit, and AIG lawyers turned them over to federal and state investigators, the people said.

“Until we can begin to understand what the charges are ... it’s hard to respond,” said David Boies, Greenberg’s attorney.