In the Court of Chancery of the State of Delaware in and for New Castle County ) Amer

EFiled: Jun 20 2007 2:30PM EDT Transaction ID 15299128 Case No. 769-VCS IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY

______) AMERICAN INTERNATIONAL GROUP, INC., ) ) Plaintiff, ) ) ) v. ) C.A. No. 769-VCS ) MAURICE R. GREENBERG and ) HOWARD I. SMITH, ) ) Defendants. ) ______) ) MAURICE R. GREENBERG, ) ) Third-Party Plaintiff, ) ) v. ) ) FRANK G. ZARB, MARTIN J. SULLIVAN, ) STEVEN J. BENSINGER, THOMAS R. TIZZIO, ) PRICEWATERHOUSECOOPERS LLP, M. ) BERNARD AIDINOFF, PEI-YUAN CHIA, ) MARSHALL A. COHEN, MARTIN S. ) FELDSTEIN, ELLEN V. FUTTER, STEPHEN L. ) HAMMERMAN, FRANK J. HOENEMEYER, ) RICHARD C. HOLBROOKE, GEORGE L. ) MILES, JR., KRISTIAN P. MOOR, EDMUND ) S. W. TSE, JAY S. WINTROB, and INS ) REGULATORY INSURANCE SERVICES, INC., ) ) Third-Party Defendants. ) ______)

DEFENDANT MAURICE R. GREENBERG’S ANSWER AND AFFIRMATIVE DEFENSES TO THE AMENDED COMPLAINT AND THIRD-PARTY COMPLAINT

{A&L-00032234-2} Defendant Maurice R. Greenberg (“Mr. Greenberg”), by his undersigned counsel,

for his Answer and Affirmative Defenses to Plaintiff’s Amended Complaint, responds as

follows:

1. Mr. Greenberg denies the allegations in paragraph 1 of the Amended

Complaint and further states that the Amended Complaint filed by American

International Group, Inc. (“AIG” or “Plaintiff”) is the culmination of efforts by AIG’s

Board of Directors to divert attention from a series of ill-advised and improper actions

they and new management have taken over the past two and a half years – actions which

have ended up seriously damaging AIG and its shareholders.

First, in an effort to justify their precipitous decision to seek the retirement of Mr.

Greenberg and the termination of Mr. Smith, and simultaneously absolve themselves

from any responsibility, AIG’s Board and new management issued numerous statements,

including the May 31, 2005 Restatement, which improperly and/or unnecessarily

criticized AIG’s prior accounting and blamed AIG’s “former management” for such

accounting. The Restatement revisited and changed complex accounting decisions that

had been carefully considered and approved over many years by AIG’s Board and its

Audit Committee; inside accountants, actuaries and auditors; outside auditors at

PricewaterhouseCoopers LLC (“PwC”);1 and inside and outside attorneys. The

Restatement reduced AIG’s shareholders’ equity at December 31, 2004 by $2.264 billion

(a 2.7% drop – from $82.871 billion to $80.697 billion) and reduced AIG’s net income for 2000-2004 by $3.924 billion (a 10.4% drop – from an aggregate $37.843 billion to an

1 PwC was well aware of the previous accounting for the transactions that form the heart of the Restatement, and PwC inexplicably changed its position to cause the restatement of items previously approved by it only months earlier. 2 aggregate $33.919 billion).2 The decision to issue the Restatements and related

statements concerning AIG’s prior accounting was made by a self-interested Board, was

not the product of a valid exercise of business judgment, and was a breach of the Board’s

fiduciary duty to exercise loyalty, good faith, due care and diligence in the management

of AIG.3

Second, the concerted efforts of AIG’s Board and current management to blame

Mr. Greenberg for every conceivable ill that they can identify is dramatically at odds with

the fact that under Mr. Greenberg’s stewardship, AIG grew from a small struggling

enterprise into the world’s largest and most successful insurance company in history –

with a market capitalization increase of an incredible 40,000% between 1969, when AIG

became a public company, and 2004. Throughout this period, Mr. Greenberg, who never

sold a single share of AIG stock while employed by the company, and who even AIG’s

Board admits was undercompensated, always acted solely in what he believed to be the

best interests of AIG and its shareholders.

Third, in February 2006, AIG’s Board and new management paid the unjustifiable

sum of $1.64 billion to settle claims and litigation that federal and state regulators had

brought. On information and belief, that expenditure of AIG funds was made, at least in

part, to shield AIG’s current officers, directors and employees from any personal

2 AIG’s May 31, 2005 10-K filing with the United States Securities and Exchange Commission (“SEC”) contained the Restatement that retroactively changed AIG’s financial statements dating back to the year 2000 (“the First Restatement”). The Restatement contained more than thirty accounting “adjustments” or “changes.” AIG’s March 16, 2006 10-K/A filing with the SEC amended that Restatement (“the Second Restatement”). 3 As noted earlier this month by James Kroeker, the Deputy Chief Accountant for the SEC: “there is no need to restate when someone at the SEC is simply asking questions about an accounting transaction. If you don’t reach the conclusion on your own that it’s an error, it’s troubling for companies to simply restate.” Nicholas Rummell, “No Easy Fix for Trivial Mistakes; No. 2 SEC accountant sees too many corrections,” Financial Week, June 11, 2007. 3 exposure to liability. As in other litigation in this Court4 and elsewhere, AIG’s Board and new management have since attempted to defend those actions by laying blame at the feet of “former members of senior management,” while attempting to absolve themselves and

AIG’s current employees, outside auditors, outside law firms, and other advisers from having any responsibility for any of the underlying transactions and accounting. Through this action, AIG’s Board continues its improper effort to blame Mr. Greenberg in an attempt to divert attention away from the fact that AIG’s current Board, led by its lead director Frank Zarb, AIG’s current Chief Executive Officer Martin Sullivan and current

Chief Financial Officer Steven Bensinger, AIG’s auditors PwC and outside counsel

Richard Beattie breached their own duties to AIG, including by causing AIG to issue an unnecessary and inappropriate Restatement.5

Fourth, although AIG claims to have conducted many months of investigation,

AIG ended up “deciding” to attempt to terminate this action against every one of AIG’s current officers and directors, and to only pursue claims against Mr. Greenberg and Mr.

Smith, despite the fact that AIG’s current officers, directors, and advisors fully

4 Regrettably, the conduct of AIG’s current Board is consistent with its improper effort to pretend that Mr. Greenberg and Mr. Smith were responsible for transactions engaged in between C.V. Starr & Co., Inc. and AIG which are the subject of a separate lawsuit, captioned Teachers’ Retirement System of Louisiana v. Greenberg, et al., C.A. No. 20106-VCS. But just as it will be shown in the Teachers action that AIG’s current Chief Executive Officer Martin Sullivan, its Senior Vice Chairman of General Insurance Thomas Tizzio (until his retirement in March 2006), who also served in the past as AIG’s President and as a Director, and its current lead director Frank Zarb, were well aware of the transactions for which they try to blame Mr. Greenberg in that action (indeed, Mr. Sullivan personally benefited by tens of millions of dollars from such transactions and directed many of them personally), so too will Mr. Greenberg show in this action that Mr. Sullivan, Mr. Tizzio and Mr. Zarb and other members of the AIG Board, as well as PwC, AIG’s auditors for the last 20 years, were aware of AIG’s accounting for transactions that were later restated and for which AIG now seeks to place sole blame on Mr. Greenberg and Mr. Smith. 5 AIG’s pretense that any decisions made by AIG over the years were the sole responsibility of Mr. Greenberg and Mr. Smith does not withstand analysis. AIG is an international enterprise with over 200 subsidiary companies and over 90,000 employees, and PwC (AIG’s outside auditors) spent in excess of 50,000 hours, for which PwC was paid in excess of $70 million, reviewing AIG’s books and records, including a full and detailed Sarbanes-Oxley analysis of AIG’s internal controls. 4 participated in and reviewed and approved each of the decisions that AIG now attacks in

its Amended Complaint. Although AIG did not name PwC as a defendant in the

Amended Complaint, neither did AIG move to terminate this action against PwC. A

plausible explanation of AIG’s failure to do either is that AIG is unwilling to bring an

action against its outside auditors, even though the Restatement reflects diametrically

opposite accounting decisions than those made and approved by PwC prior to the

governmental investigations, but is also equally unable to take the position that PwC

could be right in both of those contradictory positions.

Fifth, AIG repeatedly purports to have based the Amended Complaint on the

Complaint of the New York Attorney General (“NYAG”). See, e.g., ¶¶ 51, 56 of the

Amended Complaint. AIG omits the facts that (a) it successfully lobbied the NYAG to

sue Mr. Greenberg and even drafted most of the NYAG’s initial Complaint, and (b) most

of the allegations initially brought by the NYAG have been dismissed, including the

largest transactions AIG continues to challenge.6 For example, four of the largest issues

now challenged by AIG including Union Excess (see ¶¶ 25-28 below), Workers’

Compensation (see ¶¶ 51-53 below), DBG Legacy Reserves (see ¶¶ 29-32 below), and

Net Investment Income (see ¶¶ 33-34 below), either were never challenged by the NYAG

(DBG Legacy Reserves and Net Investment Income) or were dismissed by the NYAG

(Union Excess and Workers’ Compensation).

6 Three of the transactions challenged in both AIG’s Amended Complaint and the NYAG’s Amended Complaint – the Gen Re, Capco and Nan Shan transactions – had a de minimis impact on AIG’s financial statements. These transactions collectively amounted to no more than $30 million (0.04%) and $33 million (0.09%), respectively, of the total impact of the First Restatement on AIG’s shareholders’ equity at December 31, 2004 (as previously reported) and AIG’s net income for the period 2000 to 2004. 5 Sixth, although AIG seeks to recover damages for the costs and losses which it says resulted from the Restatement, many of the largest components of the Restatement are not even challenged by AIG in its otherwise wide-ranging Amended Complaint. For example, AIG’s Amended Complaint does not address AIG’s Life Settlements business, asbestos and environmental reserve adjustments, and the expensing of the DCPPP compensation programs run by Starr International Company, Inc. (“Starr International”), each of which were large components of the Restatement.

Seventh, although AIG also purports to seek damages it expects to result from the securities class actions brought against AIG, many of the transactions that underlie the allegations of the plaintiffs’ securities class action complaint are not even challenged by

AIG in its otherwise wide-ranging Amended Complaint against Mr. Greenberg. AIG’s

Amended Complaint does not address the following issues that are the subject of the securities class actions: Asbestos and Environmental Reserves, Life Settlements,

Richmond Re, Accounting for Derivatives, Foreign Currency Translation, Deferred

Acquisition Costs, Affordable Housing, Deferred Income Taxes, Dollar Roll

Transactions, Commutations, Sun America Partnerships, and Other Changes in

Estimates, including Accrual for Salvage and Subrogation Recoveries, Subsequent

Events Related to Reinsurance Arbitration, and Asset Realization.

Eighth, AIG’s current Board, new management, and outside counsel have embarked on a litigation strategy to attempt, no matter what the cost to AIG, to vindicate

6 the conduct and decisions of AIG’s current Board, new management, and outside counsel

in the internal investigation, the Restatement, and the $1.64 billion settlement.7

Ninth, AIG’s Board and officers know that AIG’s claims against Mr. Greenberg

are baseless. AIG knows that Mr. Greenberg (who remains one of AIG’s largest

shareholders) acted properly and in the best interests of AIG and its shareholders and did

not engage in wrongdoing or intentionally cause any damage to AIG. What AIG’s

Amended Complaint wholly ignores is that if AIG has experienced any damages, whether

by virtue of a depression of the price of AIG stock or otherwise, that is primarily

attributable to the conduct of AIG’s current Board; current management; and AIG’s

current outside auditors, outside counsel, and advisors – not to Mr. Greenberg.

Tenth, AIG’s Amended Complaint is interposed for the purpose of discouraging,

and interfering with, the business plans of Mr. Greenberg and companies with which he is

associated.

Finally, AIG’s Amended Complaint has been used as a pretext by AIG to cut off

the payment and reimbursement of attorneys’ fees and expenses to Mr. Greenberg that is

required under AIG’s Bylaws and an Expense Advancement Agreement dated June 9,

2005 (the “Advancement Agreement”). On June 15, 2007, just two days after AIG filed

the Amended Complaint in this action, AIG abruptly notified Mr. Greenberg that it would

no longer pay or reimburse him for his attorneys' fees and expenses incurred in

connection with the certain actions. Under AIG’s Bylaws and the Advancement

Agreement, AIG is required to pay or reimburse Mr. Greenberg for his attorneys’ fees

and expenses in connection with his defense of litigation. In addition, AIG’s Certificate

7 The settlement was grossly disproportionate to the size of other contemporaneous insurance company settlements with regulators. See Exhibit A. 7 of Incorporation and Bylaws provide and have provided at all relevant times that AIG

“shall indemnify to the full extent authorized by law any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person’s testator or intestate is or was a director, officer or employee or the

Corporation.” Mr. Greenberg was made a defendant in this action, in the Teachers action and in various individual and putative securities class action cases by reason of the fact that he was the Chairman of the Board and Chief Executive Officer of AIG. At all times relevant to the Actions, Mr. Greenberg acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of AIG. Even AIG has not alleged that Mr. Greenberg was motivated by personal gain or that at the time of his actions he reasonably believed that his actions were “opposed to the best interests of AIG.” AIG has been advancing Mr. Greenberg’s attorneys' fees and expenses incurred in connection with these actions. AIG has now acted wrongfully in purporting to cut off its payment, reimbursement, and advancement obligations.

2. Mr. Greenberg admits the allegations in the first and second sentences in paragraph 2 of the Amended Complaint. Mr. Greenberg denies the allegations in the last sentence in paragraph 2, except states that as Chairman and Chief Executive Officer, he had responsibility under the control of AIG’s Board for the strategic direction of AIG’s business and operations, for the selection and supervision of AIG’s top executives and for the review and approval of selected decisions (including the selection of new markets to enter), and further states that:

8 a. AIG is a holding company comprised of more than two hundred

subsidiaries world-wide with over 90,000 employees, that

consummated approximately 40 to 50 million transactions annually as

of March 2005, and it is nonsensical for AIG to claim that Mr.

Greenberg was solely responsible for all aspects of AIG’s business and

operations; and

b. as a large, multi-national, publicly traded company, the responsibility

for the business and operations of AIG is shared among numerous AIG

officers, Board of Directors and its Board committees, including the

Audit Committee, all advised by AIG’s internal and outside

accountants and auditors, internal and outside counsel, and other

advisors, and who were justified in relying on the work of all those

individuals.

3. Mr. Greenberg denies the allegations in paragraph 3 of the Amended

Complaint, except admits that Mr. Smith is a former Chief Financial Officer and director of AIG, and states upon information and belief that AIG is a holding company with hundreds of subsidiary and affiliated companies, virtually all of which are operated by their own Chief Executive Officer and Chief Financial Officer, and which provide their own financial reporting, often with a significant staff of their own accounting and financial personnel and/or with the involvement of inside and outside auditors or auditing firms or entities.

4. Mr. Greenberg denies the allegations in paragraph 4 of the Amended

Complaint, except states that although as Chief Executive Officer and Chief Financial

9 Officer, respectively, Mr. Greenberg and Mr. Smith had significant responsibilities involving the content of financial statements, in an entity the size of AIG, those responsibilities are shared among numerous AIG officers, and the Board of Directors and its committees (including its Audit Committee), all advised by AIG’s internal and outside auditors, counsel, and other advisors.

5. Mr. Greenberg denies the allegations in paragraph 5 of the Amended

Complaint, except admits that the United States Department of Justice (“DOJ”), the SEC and various state regulatory authorities have conducted investigations of certain transactions into which AIG entered, and that those transactions are also the subject of civil lawsuits.

6. Mr. Greenberg denies the allegations in paragraph 6 of the Amended

Complaint, except states that:

a. AIG has undertaken an internal investigation;

b. AIG restated its financial statements for the periods identified:

c. AIG entered into the governmental settlements described;

d. AIG is engaged in litigation relating to the foregoing;

e. far from being “required” to do the foregoing acts, AIG acted

improperly in the conduct of its internal investigation, resulting in

unnecessary or incorrect restatements to AIG’s financial statements

and excessive settlement payments, thereby creating the litigation

environment that poses the risk of additional exposure to AIG; and

10 f. the Amended Complaint constitutes the effort of AIG’s current Board

and new management and PwC to cover up their own breaches of

duty.

7. Mr. Greenberg denies the allegations in paragraph 7 of the Amended

Complaint, except denies knowledge or information sufficient to form a belief as to the identities of the persons referred to as “those acting in concert with them” in paragraph 7 and states that far from “actively conceal[ing] the actions described in this Amended

Complaint from … AIG’s board of directors” or “fail[ing] to satisfy their duties of candor to [] AIG’s board of directors,” the AIG Board of Directors, including its lead director

Frank Zarb and the members of its Audit Committee, were aware of or should have been aware of the activities described in the Amended Complaint, which were not concealed from them.

8. Mr. Greenberg admits the allegations in paragraph 8 of the Amended

Complaint, except denies knowledge or information sufficient to form a belief as to the date on which AIG’s market capitalization “was” approximately $185 billion, and states that AIG’s market capitalization increased by a factor of more than 40,000% between

1969 (when AIG became a public company with Mr. Greenberg as its Chief Executive

Officer) and the end of 2004.

9. Mr. Greenberg denies the allegations in paragraph 9 of the Amended

Complaint. Mr. Greenberg repeats and incorporates by reference his response to paragraph 2 of this Answer as if fully set forth herein and states:

a. the transactions that are the subject of the Amended Complaint did not

result in “alleged Misstatements”; and

11 b. Mr. Greenberg neither “caused AIG to enter into” nor “knowingly

participated in” any wrongdoing related thereto.

10. Mr. Greenberg denies the allegations in paragraph 10 of the Amended

Complaint, except admits that Mr. Smith is a former Executive Vice President, Chief

Financial Officer, Vice Chairman and director of AIG.

11. Mr. Greenberg denies the allegations in paragraph 11 of the Amended

Complaint and states that AIG’s “accounting practices” were directed and thoroughly vetted by AIG’s Board (including its Audit Committee) and by a wide array of professionals, including AIG’s officers and other employees who were actuaries, accountants, auditors, lawyers and insurance experts, and by outsiders, including AIG’s long-time auditors at PwC and AIG’s outside counsel. Mr. Greenberg further incorporates by reference his response to paragraph 1 of his Answer as if fully set forth herein.

12. Mr. Greenberg denies the allegations in paragraph 12 of the Amended

Complaint, except admits that AIG received subpoenas from the NYAG and SEC in early

February 2005.

13. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 13 of the Amended Complaint, except admits that he was served with subpoenas in the first half of February 2005.

14. Mr. Greenberg denies the allegations in paragraph 14 of the Amended

Complaint, except admits that AIG did not file its 10-K for 2004 with the SEC by the

March 16, 2005 deadline.

12 15. Mr. Greenberg denies the allegations in paragraph 15 of the Amended

Complaint, except states that:

a. he retired as Chief Executive Officer of AIG on March 14, 2005;

b. he retired as Chairman of AIG on March 28, 2005;

c. he resigned as a director of AIG on June 8, 2005;

d. the NYAG refused to limit the scope of the deposition referred to in

paragraph 15 or even to identify the transactions or topics that would

be discussed during the deposition;

e. the NYAG and AIG refused to allow Mr. Greenberg access to the

potentially hundreds of thousands of documents with which he could

refresh his recollection of matters on which he had worked during his

35-year tenure at AIG; and

f. in such circumstances, Mr. Greenberg upon the advice of counsel

declined to answer questions at that time.

16. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the allegations in paragraph 16 of the Amended Complaint, except admits that Mr.

Smith was terminated by AIG in March 2005 and subsequently resigned from AIG’s

Board.

17. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the allegations in paragraph 17 of the Amended Complaint, except states that:

a. AIG conducted an internal investigation in 2005;

b. AIG restated its financial statements for the periods identified in

paragraph 17; and

13 c. such Restatement was incorrect and/or unnecessary; the heart of the

Restatement related to the accounting treatment of matters well known

to AIG’s Board and its Audit Committee and to officers of AIG,

including issues relating to Union Excess, Starr International’s

Deferred Compensation Profit Participation Program, asbestos and

environmental reserves, Life Settlements and Top Level Adjustments.

18. Mr. Greenberg denies the allegations in paragraph 18 of the Amended

Complaint, except:

a. admits that various aspects of AIG’s loss reserves for the third quarter

of 2000 were discussed in the reports of certain securities analysts;

b. refers to such analyst reports for a complete and accurate description

of their contents, but notes that analyst reports from that time period

were overwhelmingly positive; and

c. states that the $59 million in “loss reserve reductions” were immaterial

to AIG’s $25 billion in reserves.

19. Mr. Greenberg denies the allegations in paragraph 19 of the Amended

Complaint, except admits, upon information and belief, that National Union Fire

Insurance Company of Pittsburgh, Pa., a subsidiary of AIG, entered into an assumed reinsurance transaction with a subsidiary of Gen Re in the fourth quarter of 2000, and states:

a. Mr. Greenberg’s involvement in that transaction totaled less than one

hour of time, which was consistent with the fact that AIG engaged in

tens of thousands of transactions of any given time;

14 b. AIG admitted in its March 30, 2005 press release that the

Restatement’s “recharacterization” of the Gen Re transaction “will

have virtually no impact on AIG’s financial condition as of December

31, 2004”; and

c. Such “recharacterization” resulted in $0 impact on AIG’s

shareholders’ equity at December 31, 2004 and in $0 impact on AIG’s

net income for 2000-2004.

20. Mr. Greenberg denies the allegations in paragraph 20 of the Amended

Complaint, except refers to the agreements referenced in paragraph 20 for a complete and accurate description of their contents.

21. Mr. Greenberg admits, on information and belief, the allegations in paragraph 21 of the Amended Complaint and refers to those financial statements for a full and accurate descriptions of their contents.

22. Mr. Greenberg denies knowledge and information sufficient to form a belief as to the truth of the allegations in paragraph 22 of the Amended Complaint, except admits, on information and belief, that reserves increased.

23. Mr. Greenberg denies the allegations in paragraph 23 of the Amended

Complaint, and states:

a. the business purpose of the Gen Re transaction was to utilize AIG’s

excess capital to enhance AIG’s business;

b. AIG decided to purchase a loss portfolio at a low acquisition cost

relative to other business opportunities; and

15 c. it was also understood that the transaction would increase AIG’s

premium income and reserves.

24. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 24 of the Amended Complaint, except refers to AIG’s restated financial statements for a complete and accurate description of their contents and states:

a. as admitted by AIG on March 30, 2005, the Restatement’s

“recharacterization” of the Gen Re transaction “will have virtually no

impact on AIG’s financial condition as of December 31, 2004;” and

b. such “recharacterization” resulted in $0 impact on AIG’s shareholders’

equity at December 31, 2004 and in $0 impact on AIG’s net income

for 2000-2004.

25. Mr. Greenberg denies the allegations in paragraph 25 of the Amended

Complaint, except admits, upon information and belief, that Union Excess is a Barbados insurance and reinsurance company that provided reinsurance to some AIG companies, and refers to relevant AIG and PwC documents for a complete and accurate description of AIG’s accounting treatment, with PwC’s approval, with respect to AIG’s transactions with Union Excess.

26. Mr. Greenberg denies the allegations in paragraph 26 of the Amended

Complaint.

27. Mr. Greenberg denies the allegations in paragraph 27 of the Amended

Complaint and further states that PwC approved the accounting for transactions involving

Union Excess for many years.

16 28. Mr. Greenberg denies the allegations in paragraph 28 of the Amended

Complaint, except admits that AIG “concluded in the Restatement…that Union Excess should be consolidated in AIG’s financial statements”; and further states:

a. shortly prior to the Restatement, AIG’s internal accounting staff and

outside auditors at PwC had analyzed the relationship between AIG

and Union Excess and determined that Union Excess should not be

consolidated with AIG;

b. the decision of AIG’s Board and new management and PwC to

consolidate Union Excess with AIG, as reflected in the Restatement,

unnecessarily and improperly reduced AIG shareholders’ equity by

$951 million, or 42.0% of the reduction in shareholders’ equity in the

May 31, 2005 Restatement; and

c. the September 2006 Amended Complaint in People of the State of New

York v. Greenberg, Index No. 401720/05 (N.Y. Sup. Ct. N.Y. County)

voluntarily dismissed all allegations concerning AIG’s transactions

with Union Excess.

29. Mr. Greenberg denies the allegations in paragraph 29 of the Amended

Complaint, and refers to the books and records and financial statements referred to for a complete and accurate description of their contents.

30. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of allegations in paragraph 30 of the Amended Complaint and refers to the books and records and financial statements referred to for a complete and accurate description of their contents.

17 31. Mr. Greenberg denies the allegations in paragraph 31 of the Amended

Complaint and further states that DBG had its own accounting staff and to the extent it had reconciliation issues, PwC was aware of them:

a. The DBG Division Issues are historical and arose due to systems

limitations. Resources were allocated to resolve the issues.

b. A number of AIG’s accounting and finance managers were aware of

these issues, which were in no way hidden or kept secret.

c. The accounting and finance managers were charged with determining

whether these balances should be written off or reserves created; it was

not the responsibility of Mr. Greenberg.

d. AIG’s Internal Audit Division prepared a formal report (as early as

2003) on these issues. This report was available to the AIG Audit

Committee and to PwC.

e. Mr. Greenberg acted in a prudent fashion when he was informed of the

situation by instructing his staff and management to increase reserves,

and investigate and resolve the issues.

32. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 32 of the Amended Complaint, except refers to Restatement for a complete and accurate description of its contents, and states:

a. the NYAG never included the DBG Legacy issues in its Complaint or

Amended Complaint against Mr. Greenberg; and

b. The Restatement is extremely vague about the nature and components

of and the events surrounding the allowance adjustments at issue.

18 Such adjustments to the balances do not necessarily imply error

requiring restatement, but appear to be based on new facts and

circumstances pertaining to the recoverability of receivables and

adjustments.

33. Mr. Greenberg denies the allegations in paragraph 33 of the Amended

Complaint.

34. Mr. Greenberg denies the allegations in paragraph 34 of the Amended

Complaint and refers to the Restatement for a complete and accurate description of its contents and states, upon information and belief:

a. the cumulative effect on AIG’s net income for the period 2000 to 2004

was $223 million, or approximately 5.7% of the reduction in net

income for that period in the Restatement; and

b. neither the initial Complaint nor the Amended Complaint in the

NYAG action mentioned these items.

35. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 35 of the Amended Complaint.

36. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 36 of the Amended Complaint.

37. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 37 of the Amended Complaint.

38. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 38 of the Amended Complaint.

19 39. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 39 of the Amended Complaint, except refers to the Restatement for a complete and accurate description of its contents and states, upon information and belief:

a. AIG did not report underwriting loss in its external financial

statements for life operations, so the Nan Shan transactions should not

have been relevant to the Restatement; and

b. the Nan Shan transactions were immaterial to AIG’s financial

statements.

40. Mr. Greenberg denies the allegations in paragraph 40 of the Amended

Complaint.

41. Mr. Greenberg denies the allegations in paragraph 41 of the Amended

Complaint, except admits that in 2000, AIG projected underwriting losses relating to its auto warranty business.

42. Mr. Greenberg denies the allegations in paragraph 42 of the Amended

Complaint, except denies knowledge or information sufficient to form a belief as to whether Capco Reinsurance Company, Ltd. was a Barbados reinsurer, and states, on information and belief:

a. the business purpose of the Capco transaction was to address expected

losses in and thereby bring finality to an unsuccessful insurance

program that AIG had earlier determined to terminate; and

b. the Capco transaction was immaterial to AIG’s financial statements.

20 43. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 43 of the Amended Complaint.

44. Mr. Greenberg admits, on information and belief, the allegations in paragraph 44 of the Amended Complaint.

45. Mr. Greenberg denies the allegations in paragraph 45 of the Amended

Complaint and refers to the Restatement for a complete and accurate description of its contents.

46. Mr. Greenberg denies the allegations in paragraph 46 of the Amended

Complaint and refers to the Restatement for a complete and accurate description of its contents and states, upon information and belief, that the Capco transaction was immaterial to AIG’s financial statements.

47. Mr. Greenberg denies the allegations in paragraph 47 of the Amended

Complaint.

48. Mr. Greenberg denies the allegations in paragraph 48 of the Amended

Complaint.

49. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations the allegations in paragraph 49 of the Amended

Complaint.

50. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 50 of the Amended Complaint, except refers to the Restatement for a complete and accurate description of its contents, and states, upon information and belief:

21 a. AIG’s auditor PwC had reviewed and approved the top level

adjustments that it subsequently recommended be reversed; and

b. the Restatement’s reversals of top level adjustments were improper

and/or unnecessary.

51. Mr. Greenberg denies the allegations in paragraph 51 of the Amended

Complaint to the extent, if any, they purport to apply to him, and refers to the May 26,

2005 Complaint in the NYAG Action for a complete and accurate description of its contents, specifically denies that he was part of a “scheme to mischaracterize premiums paid in the workers’ compensation line of insurance” and further states that the allegations quoted in paragraph 51, and all other claims by the NYAG relating to workers’ compensation issues, were voluntarily dismissed by the NYAG in the

September 6, 2006 Amended Complaint.

52. Mr. Greenberg denies the allegations in paragraph 52 of the Amended

Complaint, except admits, on information and belief, that such payments were made, refers to the settlement documents for their full content, and further states, upon information and belief:

a. such payments were unwarranted or improper;

b. the report of INS Regulatory Insurance Services, Inc. (“INS”), on

which AIG’s settlement was purportedly based, contained erroneous

calculations and was otherwise flawed;

c. several of the states alleged to have been “underpaid” by AIG in the

past have publicly stated that they were not entitled to any money at all

relating to AIG’s worker’s compensation premiums; and

22 d. AIG has recently acknowledged that it may have overpaid in making

certain of those settlement payments.

53. Mr. Greenberg denies the allegations of paragraph 53 of the Amended

Complaint and states:

a. Mr. Greenberg was not aware of any issues related to potential

underpayment of taxes or assessments in connection with AIG’s

workers’ compensation business until approximately February 1992,

when Mr. Greenberg received a memorandum from AIG’s then-

General Counsel raising such issues;

b. After Mr. Greenberg became aware of potential issues concerning the

reporting of workers’ compensation premiums, he informed AIG’s

outside auditors and various committees of AIG’s Board, which

included Frank Hoenemeyer, Martin Feldstein and Bernard Aidinoff;

c. Mr. Greenberg also gave instructions that any such problems were to

be investigated and remedied. For example:

1. Mr. Greenberg authorized the engagement of outside counsel,

Cahill Gordon & Reindel LLP and Sullivan & Cromwell LLP,

to investigate the issues raised in connection with workers’

compensation premiums and to recommend appropriate

actions;

2. Mr. Greenberg also appointed an internal management

committee, which included senior executives, to deal with the

issues and work with outside counsel; and

23 3. Mr. Greenberg required that those responsible for workers’

compensation implement measures that would eliminate any

potential for underreporting of premiums, whether or not such

issues actually existed;

4. To Mr. Greenberg’s knowledge, those responsible for

investigating and remedying these issues were unable to

determine whether AIG had in fact underpaid taxes or

assessments in connection with the workers’ compensation line

of business, nor was Mr. Greenberg advised that there were

taxes and assessments due and owing that should be paid; and

d. At no time, before or after February 1992, did Mr. Greenberg prevent

any of the numerous persons, both inside and outside of AIG, that

were responsible for addressing these workers’ compensation issues

from implementing appropriate corrective measures; to the contrary,

Mr. Greenberg demanded that any potential issues related to AIG’s

workers’ compensation business that were brought to his attention be

addressed and resolved.

54. Mr. Greenberg denies the allegations in paragraph 54 of the Amended

Complaint.

55. Mr. Greenberg denies the allegations in paragraph 55 of the Amended

Complaint, except admits that the SEC instituted a civil action against AIG, and that the

DOJ has conducted a criminal investigation of AIG and states that no criminal charges were ever brought by the DOJ against AIG relating to its accounting practices.

24 56. Mr. Greenberg denies the allegations in paragraph 56 of the Amended

Complaint, except:

a. admits that the initial NYAG and NYSID complaint was filed on or

about May 26, 2005, and refers to that initial Complaint for a complete

and accurate description of its contents;

b. denies the allegations in paragraph 56 to the extent, if any, they

purport to apply to him, and incorporates as if fully set forth herein his

responses to those allegations as they appeared in his Answer to that

Complaint;

c. states that, in their Amended Complaint, the NYAG and NYSID

voluntarily dismissed all allegations concerning workers’

compensation issues and “offshore entities” relating to reinsurance;

and

d. states that the transactions remaining in the NYAG Action had a de

minimis effect, at most, on AIG’s financial statements.8

57. Mr. Greenberg denies the allegations in paragraph 57 of the Amended

Complaint and refers to the Complaint in the SEC action for a complete and accurate

description of its contents. Mr. Greenberg also denies the allegations in paragraph 57 to

the extent, if any, they purport to apply to him and further states that he was not named as

a defendant in the SEC civil action.

8 Three of those transactions (relating to Gen Re, Capco and Nan Shan) amounted to no more than 0.04% and 0.09%, respectively, and the fourth (top level adjustments) amounted to only 0.25% and 0.60%, respectively, of the effect of the Restatement on AIG’s shareholders’ equity at December 31, 2004 (as previously reported) and AIG’s net income for the period 2000 to 2004. 25 58. Mr. Greenberg denies the allegations in paragraph 58 of the Amended

Complaint and refers to the Complaint in the SEC action for a complete and accurate description of its contents, further denies the allegations in paragraph 58 to the extent, if any, they purport to apply to him and states that Mr. Greenberg was not named as a defendant in the SEC civil action.

59. Mr. Greenberg denies the allegations of paragraph 59 of the Amended

Complaint, except refers to the settlement documents for the terms on which AIG settled the action and the amount of money AIG agreed to pay to the NYAG and NYSID with respect to workers’ compensation issues, further denies that any such payment was warranted or proper, and states upon information and belief:

a. the INS report upon which AIG’s settlement was purportedly based

contained erroneous calculations and was otherwise flawed;

b. any settlement payments relating to such issues were improper;

c. several of the states alleged to have been “underpaid” by AIG in the

past have publicly stated that they were not entitled to any money at all

relating to AIG’s workers’ compensation premiums; and

d. AIG has recently acknowledged that it may have overpaid in making

certain of those settlement payments.

60. Mr. Greenberg denies the allegations of paragraph 60 of the Amended

Complaint, except refers to the settlement document for the terms thereof, and states:

a. such payment was unwarranted or improper;

b. neither Mr. Greenberg nor Mr. Smith was named as a defendant in the

SEC action; and

26 c. as shown in Exhibit A, the payment made by AIG was significantly

greater than the amounts paid by other insurance companies to settle

regulatory claims (almost twice the next highest settlement payment

and more than eight times as high as the next highest settlement after

that), and the disparity is even greater when it is considered that most

of those settlements related almost entirely to alleged “bid-rigging,”

and the components of those settlements involving financial statement

issues were miniscule by comparison.

61. Mr. Greenberg denies the allegations in the first sentence of paragraph 61 of the Amended Complaint, except refers to the papers filed in the referenced litigations for a complete and accurate description of their contents, and further denies the allegations in paragraph 61 to the extent, if any, they purport to apply to him and further states:

a. AIG’s pleadings in certain of those litigations with respect to the

allegations made by plaintiffs in those actions are inconsistent with

certain allegations made against Mr. Greenberg by AIG in its

Amended Complaint; and

b. among others, Martin Sullivan, Thomas Tizzio and PwC are named

defendants in those actions and were named Defendants in this

derivative action, and AIG has not provided any information as to why

it has not named those individuals and that entity as Defendants in

AIG’s Amended Complaint.

27 62. Mr. Greenberg denies the allegations in paragraph 62 of the Amended

Complaint, and states that hundreds of employees of AIG, PwC and outside law firms, upon whom Mr. Greenberg reasonably relied, were involved, at one time or another, in proposing, reviewing, analyzing, approving, accounting for, and/or auditing such transactions.

63. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 63 of the Amended Complaint and states that AIG’s improper and unnecessary payments in settlement of workers’ compensation issues led to this lawsuit and that AIG has recently admitted that it may have overpaid certain premium taxes and state guaranty fund assessments.

64. Mr. Greenberg denies knowledge or information sufficient to form a belief as to the allegations in paragraph 64 of the Amended Complaint and states that AIG has expended funds on behalf of itself and its current and former officers and directors as a result of AIG’s inflated internal investigation, AIG’s flawed Restatement, and AIG’s payment of excessive amounts to improperly and unnecessarily settle with regulators, and to prosecute an action against only Mr. Greenberg and Mr. Smith, while attempting to ignore the fact that AIG and its current Board of Directors and new management and outside advisors, including PwC, are defendants in those litigations and that AIG’s improper actions are inconsistent with AIG’s pleading in those litigations.

65. Mr. Greenberg realleges and incorporates by reference his responses to paragraphs 1-64 of the Amended Complaint as if fully set forth herein.

66. Mr. Greenberg avers that the allegations in paragraph 66 of the Amended

Complaint state conclusions of law to which no responsive pleading is required. To the

28 extent a response is required, Mr. Greenberg admits that he owed a fiduciary duty to AIG, but specifically denies that he breached any duties.

67. Mr. Greenberg denies the allegations in paragraph 67 of the Amended

Complaint and states, upon information and belief:

a. if any such breaches or wrongful actions occurred, they were

committed by other persons, including AIG’s officers, directors,

employees and outside advisors (including PwC) and not by Mr.

Greenberg;

b. AIG knows that it is making baseless allegations (indeed, the NYAG

dropped the vast majority of the claims from its initial Complaint,

some of which AIG has wrongfully tried to resurrect in its Amended

Complaint); and

c. at an appropriate time, Mr. Greenberg intends to bring an action

against AIG for malicious prosecution with respect to AIG’s

continuation of this action against him.

68. Mr. Greenberg denies the allegations in paragraph 68 of the Amended

Complaint and states, upon information and belief:

a. AIG’s payment of the settlement monies referred to in paragraph 68

was unnecessary and unwarranted;

b. any damage to AIG’s reputation and good will, loss of business and

business opportunities, or increased costs of capital, was the result of

wrongful and/or unnecessary actions of AIG’s current Board of

29 Directors and new management and AIG’s other advisors (including

PwC);

c. the costs incurred of AIG’s internal investigation and Restatement

were inflated and unnecessary;

d. the Restatement itself was improper, flawed, and harmed AIG; and

e. Mr. Greenberg is not obligated to pay AIG any legal fees, costs and

related expenses and damages relating to any or all of the issues raised

by AIG in the Amended Complaint.

69. Mr. Greenberg realleges and incorporates by reference his responses to paragraphs 1-68 of the Amended Complaint as if fully set forth herein.

70. Mr. Greenberg denies the allegations in paragraph 70 of the Amended

Complaint and states, upon information and belief:

a. AIG’s payment of the settlement monies, interest, penalties and costs

referred to in paragraph 70 was unnecessary and unwarranted;

b. any harm to AIG was caused by the wrongful and/or unnecessary

actions of the AIG’s current Board of Directors and new management

including issuing the flawed Restatement and continuing this action

against only Mr. Greenberg and Mr. Smith; and

c. Mr. Greenberg is not obligated to pay AIG any legal fees, costs and

related expenses and damages relating to any or all of the issues raised

by AIG in the Amended Complaint.

71. Mr. Greenberg denies the allegations in paragraph 71 of the Amended

Complaint and states, upon information and belief:

30 a. any liability and payments by AIG were and would be improper and

unnecessary; and

b. such payments should be recovered from AIG’s current Board of

Directors, new management, and AIG’s other officers or employees or

outside advisors (including PwC), rather than from Mr. Greenberg.

72. Mr. Greenberg denies the allegations in paragraph 72 of the Amended

Complaint and states that there is no legal basis, contractual or otherwise, by which AIG can make a claim for indemnification against Mr. Greenberg.

GENERAL DENIALS

Except as otherwise expressly stated in paragraphs 1 through 72 above, Mr.

Greenberg denies each and every allegation contained in paragraphs 1 through 72 of the

Complaint, including without limitation, the headings and subheadings contained in the

Complaint, and specifically denies liability to Plaintiff, or that Plaintiff has suffered any legally cognizable damage for which Mr. Greenberg is responsible. Pursuant to Rule

8(d) of the Rules of the Court of Chancery of the State of Delaware, allegations contained in the Amended Complaint to which no responsive pleading is required shall be deemed denied. Mr. Greenberg reserves his right to amend and/or supplement his answer.

AFFIRMATIVE AND OTHER DEFENSES

Mr. Greenberg asserts the following affirmative and other defenses, without assuming the burden of proof on such defenses that would otherwise rest on Plaintiff.

First Defense

The Complaint, and each and every claim stated therein, fails to state a claim upon which relief can be granted.

31 Second Defense

Mr. Greenberg did not breach any duty owed to the Plaintiff.

Third Defense

Plaintiff’s claims are barred, in whole or in part, by the doctrine of estoppel.

Fourth Defense

Plaintiff’s claims are barred, in whole or in part, by the applicable statute of limitations.

Fifth Defense

Plaintiff’s claims are barred, in whole or in part, because Plaintiff’s claimed injuries and damages were not legally or proximately caused by any acts or omissions of

Mr. Greenberg and/or were caused, if at all, by the conduct of third parties, including without limitation AIG’s officers, directors, employees or outside advisors, or by other factors over which Mr. Greenberg had no control.

Sixth Defense

Mr. Greenberg justifiably relied upon the advice of AIG employees, accountants and auditors.

Seventh Defense

Mr. Greenberg justifiably relied upon the advice of AIG’s corporate and outside counsel.

Eighth Defense

Mr. Greenberg justifiably relied upon the advice of AIG’s outside auditors, PwC.

32 Ninth Defense

Mr. Greenberg justifiably relied in good faith upon the records of AIG and upon the information, opinions, reports and statements presented to AIG by its officers, employees, the Audit Committee and other committees of its Board of Directors and other persons with professional and/or expert competence selected by or on behalf of

AIG.

Tenth Defense

Plaintiff’s claims are barred, in whole or in part, because Mr. Greenberg did not know, and in the exercise of reasonable care, could not have known of the purported omissions, untruths and/or misconduct, if any, alleged to have resulted in Plaintiff’s decision to settle various civil actions and civil and criminal investigations and/or to issue the Restatement.

Eleventh Defense

Mr. Greenberg acted at all times in good faith and did not directly or indirectly induce the acts alleged to have resulted in Plaintiff’s decision to settle various civil actions and civil and criminal investigations and/or to issue the Restatement.

Twelfth Defense

Mr. Greenberg is not liable because he did not make false or misleading statements of material fact or omission of material fact, and he is not responsible for any allegedly false or misleading statement or omission of material fact by others.

Thirteenth Defense

The transactions upon which Plaintiff bases its claims were permissible when made pursuant to then applicable legal and accounting rules and regulations or such rules

33 and regulations were unclear or insufficiently defined at the time the transactions occurred.

Fourteenth Defense

Plaintiff’s claims are barred, in whole or in part, because the damages, if any, are speculative and uncertain.

Fifteenth Defense

At all times, and with respect to all matters contained herein, Mr. Greenberg acted in good faith, exercised reasonable care and did not know, and in the exercise of reasonable care could not have known, of the purported untruths, false or misleading statements, omissions or other conduct alleged in the Complaint.

Sixteenth Defense

Mr. Greenberg is not liable because the alleged false or misleading statements, omissions or other conduct by Mr. Greenberg about which Plaintiff complains were made in good faith, and in reasonable reliance upon the work, opinions, information, representations and advice of others upon whom Mr. Greenberg was entitled to rely.

Seventeenth Defense

Plaintiff’s claims are barred, in whole or in part, because Mr. Greenberg’s alleged conduct did not cause any harm to Plaintiff.

Eighteenth Defense

Plaintiff’s claims are barred, in whole or in part, by the contributory negligence of

Plaintiff.

34 Nineteenth Defense

Mr. Greenberg presently has insufficient knowledge or information upon which to form a belief as to whether there may be, as yet unstated, affirmative defenses available to Mr. Greenberg, and therefore reserves the right to assert any and all additional defenses in the event that discovery indicates that such defenses would be appropriate.

Twentieth Defense

Mr. Greenberg expressly reserves the right to amend and/or supplement his

Answer, defenses and all other pleadings.

Twenty-first Defense

Mr. Greenberg hereby adopts by reference any and all other applicable defenses pleaded, or as yet unstated, by any other Defendant to the extent that Mr. Greenberg may share in such defenses.

Twenty-second Defense

There is no legal basis, contractual or otherwise, by which AIG can make a claim for indemnification against Mr. Greenberg.

Twenty-third Defense

Mr. Greenberg has been exculpated for any liability that might exist under the terms of AIG’s certificate of incorporation and Section 102(b)(7) of the General

Corporation Law.

Twenty-fourth Defense

Mr. Greenberg is protected by the business judgment rule with respect to any decisions made by Mr. Greenberg that are the subject of the complaint.

35 THIRD-PARTY COMPLAINT OF MAURICE R. GREENBERG

Defendant Maurice R. Greenberg (“Mr. Greenberg”), by and through his

undersigned counsel, upon knowledge as to himself and his own actions, and upon

information and belief as to all other matters, alleges for his Third-Party Complaint9 as follows:

PRELIMINARY STATEMENT

1. The Amended Complaint filed by American International Group, Inc.

(“AIG” or “Plaintiff”) is the culmination of efforts by AIG’s Board of Directors to divert

attention from a series of ill-advised and improper actions they and new management

have taken over the past two and a half years – actions which have ended up seriously

damaging AIG and its shareholders.

2. First, in an effort to justify their precipitous decision to seek the retirement

of Mr. Greenberg and the termination of Mr. Smith, and simultaneously absolve

themselves from any responsibility, AIG’s Board and new management issued numerous

statements, including the May 31, 2005 Restatement, which improperly and/or

unnecessarily criticized AIG’s prior accounting and blamed AIG’s “former management”

for such accounting. The Restatement revisited and changed complex accounting

decisions that had been carefully considered and approved over many years by AIG’s

Board and its Audit Committee; inside accountants, actuaries and auditors; outside

auditors at PricewaterhouseCoopers LLC (“PwC”);10 and inside and outside attorneys.

The Restatement reduced AIG’s shareholders’ equity at December 31, 2004 by $2.264

9 Defined terms used herein shall have the same meaning as in Mr. Greenberg’s Answer. 10 PwC was well aware of the previous accounting for the transactions that form the heart of the Restatement, and PwC inexplicably changed its position to cause the restatement of items previously approved by it only months earlier. 36 billion (a 2.7% drop – from $82.871 billion to $80.697 billion) and reduced AIG’s net

income for 2000-2004 by $3.924 billion (a 10.4% drop – from an aggregate $37.843

billion to an aggregate $33.919 billion).11 The decision to issue the Restatements and related statements concerning AIG’s prior accounting was made by a self-interested

Board, was not the product of a valid exercise of business judgment, and was a breach of the Board’s fiduciary duty to exercise loyalty, good faith, due care and diligence in the management of AIG.12

3. Second, the concerted efforts of AIG’s Board and current management to

blame Mr. Greenberg for every conceivable ill that they can identify is dramatically at

odds with the fact that under Mr. Greenberg’s stewardship, AIG grew from a small

struggling enterprise into the world’s largest and most successful insurance company in

history – with a market capitalization increase of an incredible 40,000% between 1969,

when AIG became a public company, and 2004. Throughout this period, Mr. Greenberg,

who never sold a single share of AIG stock while employed by the company, and who

even AIG’s Board admits was undercompensated, always acted solely in what he

believed to be the best interests of AIG and its shareholders.

4. Third, in February 2006, AIG’s Board and new management paid the

unjustifiable sum of $1.64 billion to settle claims and litigation that federal and state

11 AIG’s May 31, 2005 10-K filing with the United States Securities and Exchange Commission (“SEC”) contained the Restatement that retroactively changed AIG’s financial statements dating back to the year 2000 (“the First Restatement”). The Restatement contained more than thirty accounting “adjustments” or “changes.” AIG’s March 16, 2006 10-K/A filing with the SEC amended that Restatement (“the Second Restatement”). 12 As noted earlier this month by James Kroeker, the Deputy Chief Accountant for the SEC: “there is no need to restate when someone at the SEC is simply asking questions about an accounting transaction. If you don’t reach the conclusion on your own that it’s an error, it’s troubling for companies to simply restate.” Nicholas Rummell, “No Easy Fix for Trivial Mistakes; No. 2 SEC accountant sees too many corrections,” Financial Week, June 11, 2007. 37 regulators had brought. On information and belief, that expenditure of AIG funds was made, at least in part, to shield AIG’s current officers, directors and employees from any personal exposure to liability. As in other litigation in this Court13 and elsewhere, AIG’s

Board and new management have since attempted to defend those actions by laying blame at the feet of “former members of senior management,” while attempting to absolve themselves and AIG’s current employees, outside auditors, outside law firms, and other advisers from having any responsibility for any of the underlying transactions and accounting. Through this action, AIG’s Board continues its improper effort to blame

Mr. Greenberg in an attempt to divert attention away from the fact that AIG’s current

Board, led by its lead director Frank Zarb, AIG’s current Chief Executive Officer Martin

Sullivan and current Chief Financial Officer Steven Bensinger, AIG’s auditors PwC and outside counsel Richard Beattie breached their own duties to AIG, including by causing

AIG to issue an unnecessary and inappropriate Restatement.14

5. Fourth, although AIG claims to have conducted many months of investigation, AIG ended up “deciding” to attempt to terminate this action against every

13 Regrettably, the conduct of AIG’s current Board is consistent with its improper effort to pretend that Mr. Greenberg and Mr. Smith were responsible for transactions engaged in between C.V. Starr & Co., Inc. and AIG which are the subject of a separate lawsuit, captioned Teachers’ Retirement System of Louisiana v. Greenberg, et al., C.A. No. 20106-VCS. But just as it will be shown in the Teachers action that AIG’s current Chief Executive Officer Martin Sullivan, its Senior Vice Chairman of General Insurance Thomas Tizzio (until his retirement in March 2006), who also served in the past as AIG’s President and as a Director, and its current lead director Frank Zarb, were well aware of the transactions for which they try to blame Mr. Greenberg in that action (indeed, Mr. Sullivan personally benefited by tens of millions of dollars from such transactions and directed many of them personally), so too will Mr. Greenberg show in this action that Mr. Sullivan, Mr. Tizzio and Mr. Zarb and other members of the AIG Board, as well as PwC, AIG’s auditors for the last 20 years, were aware of AIG’s accounting for transactions that were later restated and for which AIG now seeks to place sole blame on Mr. Greenberg and Mr. Smith. 14 AIG’s pretense that any decisions made by AIG over the years were the sole responsibility of Mr. Greenberg and Mr. Smith does not withstand analysis. AIG is an international enterprise with over 200 subsidiary companies and over 90,000 employees, and PwC (AIG’s outside auditors) spent in excess of 50,000 hours, for which PwC was paid in excess of $70 million, reviewing AIG’s books and records, including a full and detailed Sarbanes-Oxley analysis of AIG’s internal controls. 38 one of AIG’s current officers and directors, and to only pursue claims against Mr.

Greenberg and Mr. Smith, despite the fact that AIG’s current officers, directors, and

advisors fully participated in and reviewed and approved each of the decisions that AIG

now attacks in its Amended Complaint. Although AIG did not name PwC as a defendant

in the Amended Complaint, neither did AIG move to terminate this action against

PwC. A plausible explanation of AIG’s failure to do either is that AIG is unwilling to

bring an action against its outside auditors, even though the Restatement reflects

diametrically opposite accounting decisions than those made and approved by PwC prior

to the governmental investigations, but is also equally unable to take the position that

PwC could be right in both of those contradictory positions.

6. Fifth, AIG repeatedly purports to have based the Amended Complaint on

the Complaint of the New York Attorney General (“NYAG”). See, e.g., ¶¶ 51, 56 of the

Amended Complaint. AIG omits the facts that (a) it successfully lobbied the NYAG to sue Mr. Greenberg and even drafted most of the NYAG’s initial Complaint, and (b) most of the allegations initially brought by the NYAG have been dismissed, including the largest transactions AIG continues to challenge.15 For example, four of the largest issues

now challenged by AIG, including Union Excess, Workers’ Compensation, DBG Legacy

Reserves, and Net Investment Income, either were never challenged by the NYAG (DBG

Legacy Reserves and Net Investment Income) or were dismissed by the NYAG (Union

Excess and Workers’ Compensation).

15 Three of the transactions challenged in both AIG’s Amended Complaint and the NYAG’s Amended Complaint – the Gen Re, Capco and Nan Shan transactions – had a de minimis impact on AIG’s financial statements. These transactions collectively amounted to no more than $30 million (0.04%) and $33 million (0.09%), respectively, of the total impact of the First Restatement on AIG’s shareholders’ equity at December 31, 2004 (as previously reported) and AIG’s net income for the period 2000 to 2004. 39 7. Sixth, although AIG seeks to recover damages for the costs and losses

which it says resulted from the Restatement, many of the largest components of the

Restatement are not even challenged by AIG in its otherwise wide-ranging Amended

Complaint. For example, AIG’s Amended Complaint does not address AIG’s Life

Settlements business, asbestos and environmental reserve adjustments, and the expensing

of the DCPPP compensation programs run by Starr International Company, Inc. (“Starr

International”), each of which were large components of the Restatement.

8. Seventh, although AIG also purports to seek damages it expects to result

from the securities class actions brought against AIG, many of the transactions that underlie the allegations of the plaintiffs’ securities class action complaint are not even challenged by AIG in its otherwise wide-ranging Amended Complaint against Mr.

Greenberg. AIG’s Amended Complaint does not address the following issues that are the subject of the securities class actions: Asbestos and Environmental Reserves, Life

Settlements, Richmond Re, Accounting for Derivatives, Foreign Currency Translation,

Deferred Acquisition Costs, Affordable Housing, Deferred Income Taxes, Dollar Roll

Transactions, Commutations, Sun America Partnerships, and Other Changes in

Estimates, including Accrual for Salvage and Subrogation Recoveries, Subsequent

Events Related to Reinsurance Arbitration, and Asset Realization.

9. Eighth, AIG’s current Board, new management, and outside counsel have embarked on a litigation strategy to attempt, no matter what the cost to AIG, to vindicate

40 the conduct and decisions of AIG’s current Board, new management, and outside counsel in the internal investigation, the Restatement, and the $1.64 billion settlement.16

10. Ninth, AIG’s Board and officers know that AIG’s claims against Mr.

Greenberg are baseless. AIG knows that Mr. Greenberg (who remains one of AIG’s largest shareholders) acted properly and in the best interests of AIG and its shareholders and did not engage in wrongdoing or intentionally cause any damage to AIG. What

AIG’s Amended Complaint wholly ignores is that if AIG has experienced any damages, whether by virtue of a depression of the price of AIG stock or otherwise, that is primarily attributable to the conduct of AIG’s current Board; current management; and AIG’s current outside auditors, outside counsel, and advisors – not to Mr. Greenberg.

11. Tenth, AIG’s Amended Complaint is interposed for the purpose of discouraging, and interfering with, the business plans of Mr. Greenberg and companies with which he is associated.

12. Finally, AIG’s Amended Complaint has been used as a pretext by AIG to cut off the payment and reimbursement of attorneys’ fees and expenses to Mr. Greenberg that is required under AIG’s Bylaws and an Expense Advancement Agreement dated

June 9, 2005 (the “Advancement Agreement”). On June 15, 2007, just two days after

AIG filed the Amended Complaint in this action, AIG abruptly notified Mr. Greenberg that it would no longer pay or reimburse him for his attorneys' fees and expenses incurred in connection with the certain actions. Under AIG’s Bylaws and the Advancement

Agreement, AIG is required to pay or reimburse Mr. Greenberg for his attorneys’ fees and expenses in connection with his defense of litigation. In addition, AIG’s Certificate

16 The settlement was grossly disproportionate to the size of other contemporaneous insurance company settlements with regulators. See Exhibit A. 41 of Incorporation and Bylaws provide and have provided at all relevant times that AIG

13. Mr. Greenberg hereby asserts claims for contribution against Frank G.

Zarb, Martin J. Sullivan, Steven J. Bensinger, Thomas R. Tizzio, M. Bernard Aidinoff,

Pei-Yuan Chia, Marshall A. Cohen, Martin S. Feldstein, Ellen V. Futter, Stephen L.

Hammerman, Frank J. Hoenemeyer, Richard C. Holbrooke, George L. Miles, Jr., Kristian

P. Moor, Edmund S. W. Tse, Jay S. Wintrob (collectively the “Individual Third-Party

Defendants”), INS Regulatory Insurance Services, Inc. (“INS”) and

PricewaterhouseCoopers LLP (“PwC”). Each of these Third-Party Defendants participated in one or more of the transactions or Restatement items and/or was involved

42 in the settlement by AIG with the New York State Attorney General (“NYAG”), about

which Mr. Greenberg complains in this Third-Party Complaint.

14. In its Amended Complaint, AIG has asserted claims against Mr.

Greenberg and Mr. Smith for breach of fiduciary duty and for indemnification. Mr.

Greenberg believes the Amended Complaint is without merit and intends to defend

himself vigorously. If, however, Mr. Greenberg is held liable to make any payment as a

result of the claims asserted against him in this action, then, in accordance with

applicable Delaware state law and any other applicable law, Mr. Greenberg is entitled to

and demands indemnification and contribution from the Third-Party Defendants to the

full extent permitted by law for any damages Mr. Greenberg is ordered to pay, plus Mr.

Greenberg’s reasonable costs and expenses in this action including attorneys’ fees.

INDIVIDUAL THIRD-PARTY DEFENDANTS

15. Third-Party Defendant Frank G. Zarb (“Zarb”) has served on the Board of

Directors for AIG since 2000, serves as lead director, and served as its Interim Chairman

from the time Mr. Greenberg resigned as Chairman on March 28, 2005 until October 31,

2006. As Interim Chairman, Zarb sat as an ex officio member of all Board committees, and was Chairman of the Executive Committee. Zarb was named as a defendant in this action in the First Amended Consolidated Stockholders’ Derivative Complaint filed on

August 6, 2005 (“Amended Derivative Complaint”)

16. Third-Party Defendant Martin J. Sullivan (“Sullivan”), on March 14,

2005, was named President and Chief Executive Officer of AIG to succeed Mr.

Greenberg in those positions. Prior to serving in that capacity, Sullivan served as Vice

Chairman, and Co-Chief Operating Officer of AIG. He has served on the Board of

43 Directors of AIG since 2002, and has served as officer of AIG since 1997. Sullivan was elected as Vice Chairman and Co-Chief Operating Officer in 2003, and was Executive

Vice President of Foreign General Insurance prior to his election to the Board. Sullivan is currently a member of the AIG Finance Committee. Sullivan is also knowledgeable about and was consulted concerning DBG Legacy Reserve matters, top-level adjustments and cessions to Union Excess. Sullivan was named as a defendant in the Amended

Derivative Complaint.

17. Third-Party Defendant Steven J. Bensinger (“Bensinger”) is Executive

Vice President and Chief Financial Officer of AIG. Upon information and belief,

Bensinger was included in structuring the Covered Calls Program, and participated in reviewing AIG’s Covered Calls and Municipal Tender Option Bonds Programs from an accounting standpoint. Bensinger also was responsible for AIG’s improper and unnecessary Restatement, including the improper consolidation of Union Excess.

18. Third-Party Defendant Thomas R. Tizzio (“Tizzio”) was President of AIG from 1991 to 1997 and served on the Board of Directors from at least as early as 1999 until 2003. In 2003, Tizzio was named as an Honorary Director of AIG, and prior to his retirement in March 2006 served as part of AIG’s management as Senior Vice Chairman of General Insurance. Tizzio was involved in the investigation and in directing and monitoring remedial measures concerning the workers’ compensation booking matter, and was also aware of DBG Legacy Issues. Tizzio was named as a defendant in the

Amended Derivative Complaint.

19. Third-Party Defendant Bernard Aidinoff (“Aidinoff”) is a retired partner and is Senior Counsel of Sullivan & Cromwell. Aidinoff served on the Board of

44 Directors of AIG from 1984 until May 2006. Aidinoff also served on the Audit

Committee, the Nominating and Corporate Governance Committee, the Executive

Committee, the Regulatory, Compliance and Legal Committee, the Finance Committee, the Audit Committee and the Executive Committee, from at least as early as 1999.

Aidinoff also was involved in matters pertaining to AIG’s improper consolidation of

Union Excess. Aidinoff reviewed with the AIG Audit Committee the program at AIG to improve the operation of the workers’ compensation program including the classification of premiums, in certain business areas. Aidinoff was named as a defendant in the

Amended Derivative Complaint. Aidinoff was involved with AIG since 1970 as Sullivan

& Cromwell’s lead attorney for AIG and led Sullivan & Cromwell’s investigation of workers’ compensation issues for AIG in the early 1990s

20. Third-Party Defendant Pei-Yuan Chia (“Chia”) served on the Board of

Directors of AIG from 1996 until his retirement in 2006. Chia served on the Finance

Committee, Compensation Committee, and the Audit Committee of AIG. Chia was named as a defendant in the Amended Derivative Complaint.

21. Third-Party Defendant Marshall A. Cohen (“Cohen”) has served on the

Board of Directors of AIG since 1992. From 1993 to 2002, Cohen served on AIG’s

Stock Option and Compensation Committee. Cohen is currently on the Nominating and

Corporate Governance Committee and has been a member of the committee since 2002.

Cohen also has been a member of the Compensation and Management Resources

Committee from 2002 to the present. Cohen was named as a defendant in the Amended

Derivative Complaint.

45 22. Third-Party Defendant Martin S. Feldstein (“Feldstein”) has served on the

Board of Directors of AIG since 1987. Feldstein is currently on the Finance Committee of AIG and has been a member of the committee since 1993. Feldstein was a member of the Public Policy and Social Responsibility Committee and the Compensation Committee in 2005. Feldstein is also a member of the Regulatory Compliance and Legal Committee.

Feldstein was named as a defendant in the Amended Derivative Complaint.

23. Third-Party Defendant Ellen V. Futter (“Futter”) has served on the Board of Directors of AIG since 1999. Futter was a member of the Finance Committee of AIG in 2004 and the Stock Option and Compensation Committee from 2000 to 2002. Futter is a member of the Nominating and Corporate Governance Committee, and has been a member of that Committee since 2002. Futter is also a member of the Regulatory,

Compliance and Legal Committee, and has been a member of that Committee since April

21, 2005. Futter was named as a defendant in the Amended Derivative Complaint.

24. Third-Party Defendant Stephen L. Hammerman (“Hammerman”) has served on the Board of Directors of AIG since March 7, 2005. Hammerman is the Chair of AIG’s Regulatory, Compliance and Legal Committee (since April 2005), and a member of the Public Policy and Social Responsibility Committee (since 2006).

Hammerman is a member of a Special Litigation Committee established by AIG in 2005.

25. Third-Party Defendant Frank J. Hoenemeyer (“Hoenemeyer”) served on the Board of Directors of AIG from 1985 until August 11, 2005. Hoenemeyer was a member of the AIG Stock Option and Compensation Committee from 1985 to 2002.

Hoenemeyer was a member of the Finance Committee from 1993 to 2004. Hoenemeyer was a member of the Audit Committee from 1994 to August 2005, serving as Chair of

46 that Committee from 2002 to August 2005. Hoenemeyer was also a member of the

Executive Committee from 1997 to 2004. Hoenemeyer was named as a defendant in the

Amended Derivative Complaint.

26. Third-Party Defendant Richard C. Holbrooke (“Holbrooke”) has served on the Board of Directors of AIG since 2000. Holbrooke is currently the Chair of the Public

Policy and Social Responsibility Committee of AIG.

27. Third-Party Defendant George L. Miles, Jr. (“Miles”) has served on the

Board of Directors of AIG since April 21, 2005. Miles is a Chair of AIG’s Nominating and Corporate Governance Committee (of which he has been a member since August

2005), and a member of the Audit Committee (since May 2005) and the Public Policy and Social Responsibility Committee (since April 2005). Miles is a member of a Special

Litigation Committee established by AIG in 2005.

28. Third-Party Defendant Kristian P. Moor (“Moor”) is Executive Vice

President and CEO of AIG’s DBG Domestic General Insurance Unit. Upon information and belief, Moor was knowledgeable about and/or was responsible for issues relating to

DBG Legacy Reserves, workers’ compensation, Union Excess and top-level adjustments at DBG. Moor was named as a defendant in the Amended Derivative Complaint.

29. Since 1999, Third-Party Defendants Moor, Sullivan and Tizzio have been the three top executives responsible for AIG’s General Insurance business. Most of the

Restatement items specifically described in AIG’s Amended Complaint were in AIG’s

General Insurance business.

30. Third-Party Defendant Edmund S. W. Tse (“Tse”) is Senior Vice

Chairman of Life Insurance of AIG. Tse has served on the Board of Directors of AIG

47 since 1996, and as an officer of AIG since 1991. Tse has served as Vice Chairman from at least as early as 1999, Co-Chief Operating Officer since 2003, and as Senior Vice

Chairman, Life Insurance of AIG since 2002. Tse was named as a defendant in the

Amended Derivative Complaint.

31. Third-Party Defendant Jay S. Wintrob (“Wintrob”) served on the Board of

Directors from 1999 to 2003, and has served as Executive Vice President – Retirement

Services since 2003. He was a member of the Finance Committee of AIG from 1999 to

2003. Wintrob was named as a defendant in the Amended Derivative Complaint.

THIRD-PARTY ENTITY DEFENDANTS

32. Third-Party Defendant INS Regulatory Insurance Services, Inc. (“INS”) is a Delaware Corporation with offices in Pennsylvania, Maryland and Delaware. INS is a regulatory consulting firm that prepared a report for the New York Department of

Insurance (“NYSID”) and the New York State Attorney General (“NYAG”) which focused on purportedly improper booking of certain premiums from AIG’s workers’ compensation businesses. The INS report contained erroneous calculations and reached erroneous conclusions upon which AIG purports to have based its settlement concerning its workers’ compensation program.

33. Third-Party Defendant PricewaterhouseCoopers LLP (“PwC”) is a limited liability partnership whose offices are located at 300 Madison Avenue, New York, New

York. PwC, and its predecessor Coopers & Lybrand, serve, and have served as AIG’s external auditors for more than 20 years.

48 FACTUAL ALLEGATIONS

34. Beginning in mid-March 2005, AIG conducted an internal review of its accounting covering a period of more than four years and, on May 31, 2005 filed its Form

10-K for the fiscal year ended December 31, 2004. The Form 10-K restated AIG’s financial statements for the years ended December 31, 2000 to 2003, the quarters ended

March 31, June 30 and September 30, 2003 and 2004, and the quarter ended December

31, 2003 (the “First Restatement”). The First Restatement reflected a total reduction in net income of $3.924 billion and a reduction of shareholders’ equity of $2.264 billon.

35. The Form 10-K filed on May 31, 2005 was signed by Third-Party

Defendants Martin J. Sullivan, Steven J. Bensinger, M. Bernard Aidinoff, Pei-Yuan Chia,

Marshall A. Cohen, Martin S. Feldstein, Ellen V. Futter, Frank J. Hoenemeyer, Richard

C. Holbrooke, Edmund S.W. Tse, and Frank Zarb.

36. AIG also filed a 2004 Form 10-K/A on March 16, 2006 in which AIG restated its consolidated financial statements and financial statement schedules for the years ended December 31, 2004, 2003 and 2002, along with 2001 and 2000 for purposes of the preparation of its Selected Consolidated Financial Data for 2001 and 2000, and quarterly financial information for 2004 and 2003 (the “Second Restatement”) (the First and Second Restatements are collectively referred to herein as the “Restatements”). The flawed Restatements caused, within days or weeks, (i) Standard & Poor’s to lower the long-term senior debt and counterparty ratings of AIG from ‘AAA’ to ‘AA’ and to change its outlook rating to negative; (ii) Moody’s Investor Services to lower AIG’s long-term senior debt rating from ‘Aaa’ to ‘Aa2’; and (iii) Fitch Ratings (“Fitch”) to downgrade AIG’s long-term senior debt ratings rom ‘AAA’ to ‘AA’ and to place AIG’s

49 ratings on Fitch’s “Rating Watch Negative” list; all of which resulted in a significant increase in AIG’s cost of capital.

37. The Form 10-K/A filed on March 16, 2006 was signed by Third-Party

Defendants Steven J. Bensinger, AIG’s Executive Vice President and Chief Financial

Officer, as Attorney-in-Fact for Third-Party Defendants Martin J. Sullivan, M. Bernard

Aidinoff, Pei-yuan Chia, Marshall A. Cohen, Martin S. Feldstein, Ellen V. Futter,

Richard C. Holbrooke, Edmund S. W. Tse, and Frank Zarb.

38. AIG attributed the Restatements, in significant part, to unspecified acts or omissions by “former members of senior management.” The First Restatement served as the purported basis upon which AIG agreed to pay $1.64 billion to regulators in February

2006 to settle certain litigation and investigations.

39. The Third-Party Defendants were motivated to issue the Restatements by their own self-interest, not the interests of the shareholders of AIG, including Mr.

Greenberg. The Restatements were an extreme overreaction to governmental investigations and were designed to cast predecessor management in a negative light, and to set an artificially low threshold for evaluating the future performance of AIG under the new management.

40. The decision to issue the Restatements was made by a self-interested

Board, was not the product of a valid exercise of business judgment, and was a breach of the Third-Party Defendants’ fiduciary duty to exercise loyalty, good faith, due care and diligence in the management and administration of AIG.

50 41. Third-party Defendant PwC urged AIG’s current Board and new

management to reach certain conclusions leading to the Restatements, often in direct

contradiction of accounting decisions it had previously made or approved.

42. The Restatements set forth seven “categories” of restated items: Risk

Transfer; Loss Reserves (Directed Entries); Net Investment Income; Top Level

Adjustments (Other Than Loss Reserves); Conversion of Underwriting Losses to Capital

Losses; Asset Realization; Other GAAP Corrections. In addition, the Restatements

included massive – and unwarranted – increases in estimates relating to reserves for

losses and loss expenses for the Fourth Quarter of 2004.

43. In the Restatements and in statements to the press, AIG has suggested that

all of these changes were necessary to correct errors for which “former members of

senior management” were responsible. As the Restatements reflect, however, most of the

largest changes have nothing to with any alleged prior improper conduct by anyone, much less by “former members of senior management.”

44. AIG has further suggested that some of the changes were made due to alleged “new information” that purportedly had not been made available to AIG management and/or its auditors PwC until early in 2005. The vast majority of the restated matters, however, had been well-known to both AIG’s Audit Committee, including Third-Party Defendant Frank Zarb, and PwC for many years.

45. The reversal by AIG’s management and its external auditors on so many issues set forth in the Restatements demonstrate that the Restatements were motivated not by sound business judgment and appropriate principles of corporate governance but rather by personal self-interest.

51 46. As set forth below, many of the largest items in the Restatements reflect

(a) incorrect applications of relevant accounting principles resulting in enormous reductions in shareholders’ equity; (b) improperly motivated decisions to restate items that had long been on the summary of unadjusted differences (“SUD”), resulting in huge decreases in net income; (c) improper changes in estimates that resulted in large decreases in net income and shareholders’ equity; and (d) unwarranted reversals of longstanding agreed-upon and appropriate accounting treatments.

47. Many of the largest components of the Restatement were unnecessary or incorrect, including Union Excess, Life Settlements, asbestos and environmental reserve adjustments, the expensing of the DCPPP compensation and Top Level Adjustments.

A. Third-Party Defendants’ Incorrect Application of Accounting Principles – Union Excess Consolidation

48. One of the largest items in the Restatement, AIG’s decision to effectively consolidate Union Excess Reinsurance Company, Ltd. (“Union Excess”), resulted in a reduction in shareholders’ equity of just under $1 billion. Upon information and belief, this was the largest single item in the Restatement, and encompassed 42.0% of the entire

Restatement’s reduction in AIG shareholders’ equity.

49. Upon information and belief, the decision to consolidate or “effectively consolidate” Union Excess was simply wrong under applicable accounting rules, and contradicted analyses conducted by AIG’s own accounting staff and its external auditors at PwC, and resulted from reversals of position by PwC and AIG, made, upon information and belief, in reaction to regulators who were focusing on off-shore entities such as Union Excess.

52 50. Upon information and belief, until shortly before March 30, 2005, when

AIG filed its Form 8-K stating that it might consolidate Union Excess, PwC and AIG each independently had concluded that AIG should not consolidate Union Excess.

51. Union Excess recently commenced an action against Starr International

Company, Inc. (“Starr International”)17, and is seeking approximately $85 million under the Swap Agreement, further evidencing that Starr International, not AIG, bore the risk of loss with respect to Union Excess.

52. Starr International has determined that it must consolidate Union Excess onto its financial statements.

53. Upon information and belief, the reversal of position of PwC and other

Third-Party Defendants with respect to the consolidation of Union Excess was motivated by a desire to enlarge the size of the Restatement.

54. As a result of the unwarranted reversal of position by AIG’s Board and new management and PwC, AIG shareholders’ equity at December 31, 2004 was wrongfully reduced by $951 million.

B. Improper Expensing of the Starr International DCPPPs

55. Starr International was established in 1943 by Cornelius Vander Starr, and developed into a worldwide network of managing general insurance agency businesses

(“MGAs”). By 1970, Starr International maintained more than 100 offices in approximately 40 foreign countries.

17 Starr International is a private company that was incorporated in Panama in 1943. It was formed more than two decades before AIG was formed and has neither been a subsidiary of AIG nor of any other company, nor been consolidated with AIG or another company. 53 56. In 1970, Starr International exchanged its MGAs for common stock of

American International Reinsurance Company, Inc. (“AIRCO”), which at that time was

AIG’s largest shareholder.

57. In 1975, Starr International began providing the Deferred Compensation

Profit Participation Plans (“DCPPPs”) to persons whom the Starr International voting shareholders deemed to have added value to SICO and its AIRCO shares. The express purpose of the first DCPPP was to increase the value of Starr International. The governing documents for each of the fourteen subsequent two-year DCPPPs contained substantially identical language relating to the purpose of the DCPPP.

58. Under each two-year DCPPP, Starr International set aside a portion of its

AIRCO (later AIG) shares to reward, among others, AIRCO and AIG employees and other executives for contributing to the growth of Starr International. The DCPPP grants were always made solely by Starr International, at no cost or expense to AIG or its stockholders, thereby relieving AIG from having to devote its own resources to such a plan. AIG never paid for, nor was charged for, the DCPPP grants and, until the

Restatement, AIG did not treat the DCPPP grants as an AIG expense.

59. Throughout the entire 30-year period that the DCPPPs were provided by

Starr International, AIG’s internal audit staff, the Audit Committee of AIG’s Board of

Directors, and AIG’s external auditors at PwC and its predecessors were fully aware of the manner in which the DCPPPs operated. AIG and its external auditors, supported by outside counsel, repeatedly discussed the accounting treatment to be applied to the

DCPPPs, and always determined that the amounts at issue were not material.

54 60. Beginning with its financial statements for the year ending December 31,

2001, AIG provided footnote disclosures in its public filings that described the DCPPPs and their history, and specifically identified the amounts that would have accrued had

AIG expensed the DCPPPs.

61. Not until the First Restatement was issued did AIG expense the grants made by Starr International to participants in the DCPPPs, and the Third-Party

Defendants improperly decided that the decision to expense the DCPPP grants should be made retroactively.

62. PwC had on occasion recommended in the past that AIG expense the

DCPPPs but, as AIG stated in the Restatement, the “amount of the deferred compensation granted by Starr International … was not included as an expense in the calculation of

AIG’s consolidated net income because the amounts had been determined not to be material to AIG’s consolidated results of operations in any individual period.” (emphasis added).

63. In 2003, the AIG Audit Committee also concluded that the DCPPP amounts were not material to the AIG financial statements.

64. As with the other large Restatement items discussed herein, the

Restatement’s retroactive reversal of years of consistent accounting treatment raises serious questions concerning the motivation of AIG’s current Board and new management.

65. The Board’s erroneous decision to retroactively expense the DCPPPs in the Restatement resulted in a decrease in AIG’s net income over the period from 2000

55 through 2004 of $496 million (12.6% of the total Restatement), and a reduction of $1.401 billion in retained earnings including $905 million for periods prior to 2000.

C. Third-Party Defendants’ Improper Changes in Estimates

66. As with their decision to consolidate Union Excess, the Third-Party

Defendants’ decision to increase asbestos and environmental (“A&E”) reserves by $850 million was not the result of careful analysis, but was a change made without sufficient basis that had the effect of reducing net income and shareholder’s equity by an after-tax amount of approximately $552 million.

67. Upon information and belief, far from citing a need to increase such reserves, PwC reported to the Audit Committee of the AIG Board on February 8, 2005 that PwC was comfortable with the levels of asbestos and environmental reserves.

68. Prior to March 2005, AIG used two methodologies to determine an appropriate reserve level for A&E claims: (a) the “Market Share” method, which applied the market share of the relevant AIG companies to estimated potential industry ultimate losses and loss expenses based on the latest estimates from Tillinghast and A.M. Best; and (b) the “frequency/severity” or “Report Year” method, which utilized current information on AIG’s actual A&E claims as the basis of the analysis. There are several

“scenarios” in each test.

69. Upon information and belief, in the fourth quarter of each year, the AIG

Actuarial Department coordinated with employees of AIG’s asbestos and environmental claims units to determine claims trends and to test the adequacy of reserves. These year- end reserve tests were designed to ensure that the reserves fell within an acceptable range

56 of potential estimates. If the reserve amount is within the range, it is considered an appropriate reserve.

70. Upon information and belief, the level of A&E reserves was signed off on in prior years by AIG actuarial personnel, including by Frank Douglas, AIG’s chief actuary, without any concerns raised to senior management or AIG’s Audit Committee as to the adequacy of A&E reserves.

71. PwC audited AIG’s A&E reserves annually and its claims practices several times throughout the relevant period and always found AIG’s A&E reserves to be reasonable. On at least two occasions, PwC stated that AIG’s claims practices were “best in class.” Indeed, PwC conducted an audit of AIG’s asbestos unit in January 2005 – shortly before AIG’s improper decision to increase the A&E reserves – and found reserve levels were reasonable. As set forth above, PwC also stated at the February 8, 2005 AIG

Audit Committee meeting that it was comfortable with prior A&E reserve levels.

72. Upon information and belief, the improper decision by the AIG Board and new management to increase the A&E reserves was not made until May 2005. This eleventh hour change in estimate of A&E reserves reflects an improper choice of the very highest result of the various tests described above.

73. Both AIG and PwC have acknowledged that the setting of such reserves is

“subjective” and merely an estimate. Given that the purported subjectivity and uncertainty inherent in setting A&E reserve levels, the fact that AIG ostensibly utilized information that post-dated Mr. Greenberg’s tenure as AIG Chairman and Chief

Executive Officer, and the fact that prior reserve levels were approved by actuaries and internal and external auditors, there can be no credible claim that previous methods

57 employed to determine A&E reserve levels were inadequate or caused a material misstatement of AIG’s financial reporting of A&E reserves.

74. The Third-Party Defendants benefited from the unwarranted increase in

A&E reserves in a very telling way; choosing to increase A&E reserve levels protected them with an income “cushion” so that they could later release some of these unnecessary

A&E reserves to boost net income and thereby improve the appearance of the performance of AIG’s current Board and new management.

75. The total of changes in estimates in the Restatement resulted in an increase of reserves levels, and a concomitant decrease in net income and stockholders’ equity of

$1.602 billion dollars. As set forth above, more than half of this amount was due to the unwarranted change in estimate for the A&E reserves.

D. Life Settlements

76. AIG’s Board and new management also retroactively changed its accounting treatment of AIG’s life settlements program. The result of this unwarranted reversal was a $394 million reduction in net income over the period from 2000 through

2004 (10.0% of the Restatement) and a decrease in shareholders’ equity of $396 million

(17.5% of the Restatement).

77. AIG’s life settlements business involves providing financing and reinsurance to a non-consolidated trust that purchased life insurance policies from insureds for more than the cash surrender value but less than the inchoate future insurance proceeds. The trust pays the premiums on the policies and ultimately receives the policy’s death benefits; the insured gets the use of the purchase price while still alive.

58 78. Notwithstanding the claims made in the Restatement that the accounting reversal was due to “new information which was not available to management” earlier,

AIG’s internal accounting staff and auditors, its Audit Committee and PwC were fully and completely informed and consulted regarding the accounting for life settlements from its inception in 2001 through the Restatement, and approved the accounting treatment for this business. Indeed, accounting issues relating to this business were referred to PwC’s national office before the business was even undertaken by AIG.

79. PwC reviewed and agreed with AIG’s accounting treatment for this business. Upon information and belief, in response to a change in accounting rules effective in July 2003, the structure of this business was altered after discussions with

PwC’s national office, and the auditors reviewed and agreed with the continued nonconsolidation of the trusts that purchased the life insurance policies.

80. In April 2004, PwC reiterated its agreement with the accounting treatment of the life settlements business, based in part upon a legal opinion provided by outside counsel.

81. Upon information and belief, no one expressed any concern regarding the appropriate accounting treatment of these matters at the March 7, 2005 AIG Audit

Committee meeting with PwC.

82. After years of repeated review, consultation, approval and the receipt of several legal and accounting opinions of AIG’s auditors and outside law firms, the Third-

Party Defendants, including AIG’s current Board and new management and PwC, decided to make a retroactive change to AIG’s accounting for life settlements, despite the fact that it was not required.

59 83. This eleventh hour reversal by the Third-Party Defendants resulted in a reduction in net income over the period from 2000 through 2004 of $394 million and a decrease in shareholders’ equity of $396 million.

E. Top-Level Adjustments

84. Upon information and belief, PwC examined all proposed top-level entries, including loss reserve adjustments, at AIG and at each operating unit. Such entries were not made if PwC did not have support for them. Therefore, no top-level entries were made without explanation, and if PwC objected to an entry, it could not be made.

85. Upon information and belief, PwC was required to review AIG management’s adequacy of established loss reserves through the utilization of a number of analytical reserve development techniques. PwC spent thousands of hours annually reviewing AIG’s loss reserves, arriving at its own independent estimates.

86. At no time during this period did PwC raise an issue with the AIG Audit

Committee regarding adjustments to loss reserves. PwC would not sign off on any loss reserve adjustment without adequate support.

87. Indeed, upon information and belief, PwC acknowledged at the March 7,

2005 AIG Audit Committee meeting that PwC would not have objected if AIG released as much as $500 million to $1 billion in reserves, and reported higher income.

88. The decision of AIG’s current Board and new management and PwC to reverse certain top-level entries in the Restatement resulted in a $ 206 million reduction in AIG’s shareholders’ equity and a $ 226 million reduction in net income and was unwarranted.

60 F. Other Restatement Items

89. Upon information and belief, the infirmities infecting the specific

Restatement items discussed herein are equally applicable to the many other Restatement items. Overall, the First and Second Restatements were not borne of necessity but instead of a desire to avoid personal liability, to cast “prior members of senior management” in a negative light, and to set an artificially low threshold for evaluating the performance of the Third-Party Defendants going forward.

G. The 2006 Settlement With Regulators

90. On February 9, 2006, AIG announced that it had settled the lawsuit brought by the New York Attorney General and the New York State Insurance

Department as well as investigations being conducted by the United States Securities and

Exchange Commission (“SEC”) and the United States Department of Justice (“DOJ”).

91. As a result of these settlements, AIG agreed to pay $1.64 billion as follows:

x $343.5 million to compensate each of the fifty states with respect to

alleged underpayment of workers compensation taxes and assessments;

x $375 million to pay AIG insureds who purchased excess casualty policies

through broker Marsh & McLennan;

x $800 million (including a $100 million penalty) into a fund for investors

involved in shareholder litigation relating to “AIG’s accounting and

financial reporting practices” – i.e., upon information and belief, the

financial reporting matters that are the subject of the Restatements;

61 x Fines of $100 million to the State of New York and $25 million to the

DOJ.

92. The settlement, approved by the Third-Party Defendants, was not justified and was not in the best interest of AIG or its shareholders.

93. For example, the payments made by AIG relating to purported underpayment on workers’ compensation lines of insurance were based upon a report prepared by Third-Party Defendant INS (“INS Report”).

94. Upon information and belief, the INS report contained erroneous calculations and was otherwise flawed. Indeed, several of the states alleged to have been

“underpaid” by AIG in the past have publicly questioned the workers’ compensation portion of the settlement. An April 24, 2006 article in Business Insurance reported that

“at least three states question why they are even included in the deal” because AIG could not have written business in those states, which are monopoly insurance states.

95. Third-Party Defendant INS prepared a flawed report, and the Third-Party

Defendants approved a flawed settlement including payments to states of monies to which those very states claim they are not entitled.

96. Thus, the improper actions of AIG’s Board and new management in accepting the flawed INS Report and making excessive and unnecessary payments relating to the workers’ compensation issues has harmed AIG. AIG has recently acknowledged that it may have overpaid in making certain of those settlement payments.

97. In their Amended Complaint, the NYAG and NYSID have dropped all allegations concerning workers’ compensation issues.

62 98. The $375 million relating to clients of Marsh presumes that every such client was a victim of the bid-rigging scheme alleged by regulators. Third-Party

Defendants’ fiduciary duties to shareholders would require an analysis of such policies to determine whether and to what extent any payment to such policyholders was necessary in respect of a business line that was an industry loss leader for relevant periods.

99. Immediately after learning of the bid-rigging issue, Mr. Greenberg caused

AIG to engage the law firm of Kramer Levin Naftalis & Frankel LLP to investigate the matter, and directed AIG’s General Counsel Ernest Patrikis to work with Kramer Levin and regulators to fully investigate the matter.

100. Even the $800 million fund, ostensibly for investors, would have been unnecessary but for the improper decision of the Third-party Defendants and PwC to issue the Restatements. Establishing this fund eliminated AIG’s ability to invest or otherwise use the money to enhance and grow its business, and thereby benefit shareholders.

101. PwC, and its predecessor Coopers & Lybrand, have served as the outside auditors for AIG for more than twenty years. AIG and Mr. Greenberg had a right to expect that PwC was doing the job it was paid to do and, in accordance with applicable auditing standards, if PwC had any questions or concerns about any matter, it should have investigated further or raised its concerns with AIG’s Audit Committee.

102. At no time during Mr. Greenberg’s decades-long tenure at AIG did AIG receive from its outside auditors a qualified opinion or an adverse opinion because of departures from GAAP.

63 103. Upon information and belief, PwC reviewed and approved the related party transactions with the C.V. Starr agencies at issue in the Teachers litigation.

104. Upon information and belief, in 2004, PwC devoted more than 50,000 person hours to conducting an exhaustive review of AIG’s internal controls over financial reporting. At the March 7, 2005 AIG Audit Committee meeting, PwC reported that it had not identified any material weaknesses in AIG’s internal controls over financial reporting, a finding that was consistent with all previous audits of AIG by PwC and its predecessor Coopers & Lybrand. In fact, PwC did not raise any of the issues that are now restated in the Form 10-K or, to the extent any were raised, deemed them to be immaterial.

105. Upon information and belief, in February 2005, PwC concurred with management’s view that no adjustment listed in PwC’s summary of unadjusted differences was material, individually or in the aggregate.

106. In March 2005 PwC reported to the AIG Audit Committee that PwC was comfortable with management’s reserves estimate, that no material weaknesses in internal controls had been identified, and that PwC would be issuing a clean opinion.

107. As set forth herein, from March to May 2005, AIG management and the

AIG Audit Committee conducted an internal review of AIG’s books and records. As

AIG’s own May 31, 2005 press release reveals, “AIG’s internal review was conducted in consultation with” PwC. During this same time period, PwC conducted an “expanded audit” of AIG.

108. PwC acted only in its own self-interest, and contrary to its obligations to

AIG, in reviewing AIG’s First Restatement and urging and agreeing with AIG’s current

64 Board’s and new management’s opinions and statements. Thus, PwC issued an unqualified opinion with respect to AIG’s financial statements and “management’s assessment that AIG did not maintain effective internal control over financial reporting as of December 31, 2004,” and issued an adverse opinion with respect to the internal controls already identified by new management. PwC also reviewed AIG’s Second

Restatement and issued the same opinions.

109. As set forth herein, PwC was fully aware of and issued unqualified opinions with respect to accounting in prior years for the very items restated in the First and Second Restatements.

110. As stated in AIG’s April 5, 2006 “Notice of Annual Meeting of

Shareholders,” the AIG Audit Committee “spent a significant amount of time with the

PwC engagement team” throughout 2005. AIG paid PwC more than $78 million in 2005.

111. Upon information and belief, on December 14, 2006, the Public Company

Accounting Oversight Board (“PCAOB”) issued a report concerning its inspection of

PwC’s 2004 audits, conducted from July 2005 to March 2006. The PCAOB’s inspection of PwC included performing field work at PwC’s National Office and at sixteen of its practice offices in the United States.18

112. Upon information and belief, the PCAOB identified many audit deficiencies in at least nine of PwC’s 2004 client audits, including some deficiencies that

“were of such significance that it appeared to the inspection team that the Firm [PwC], at the time it issued its audit report, had not obtained sufficient competent evidential matter

18 See http://www.pcaobus.org/Inspections/Public_Reports/2006/PricewaterhouseCoopers.pdf. 65 to support its opinion on the issuer’s financial statements.” The resulting report does not

identify whether AIG was one of the PwC clients identified by PCAOB in that study.

113. As set forth in detail herein, AIG and Mr. Greenberg relied on PwC to

perform audits of AIG throughout the years in accordance with applicable auditing

standards. In its desire to retain AIG as a client in the face of regulatory investigations of

AIG and its efforts to protect itself from criticism by the PCAOB, PwC conspired with

the Third-Party Defendants in an effort to blame “members of former senior

management,” including Mr. Greenberg.

114. As set forth in detail herein, PwC has breached its duty to, and its

contracts with, AIG.

115. The AIG Board of Directors currently includes the following persons:

Martin J. Sullivan, Marshall A. Cohen, Martin S. Feldstein, Ellen V. Futter, Stephen L.

Hammerman, Richard C. Holbrooke, Fred H. Langhammer, George L. Miles, Jr., Morris

W. Offit, James F. Orr, III, Virginia M. Rometty, Michael H. Sutton, Edmund S. W. Tse,

Robert B. Willumstad, and Frank G. Zarb. Sullivan and Tse are also inside directors who hold senior positions at the Company.

116. Directors Sullivan, Marshall Cohen, Feldstein, Holbrooke, Tse and Zarb also signed the Restatements in an attempt to cast predecessor management in a negative light and to set a low threshold for evaluating their future performance in managing the

Company. This self-interested act to blame others and help themselves resulted in making accounting changes that were incorrect, unwarranted, self-interested and harmful to AIG.

66 117. Directors Sullivan, Marshall Cohen, Feldstein, Hammerman, Holbrooke,

Langhammer, Miles, Offit, Sutton, Tse, Willumstad, and Zarb were members of the

Board on February 9, 2006 when AIG announced an agreement with federal and New

York authorities that resulted in a settlement in which AIG would make payments totaling approximately $1.64 billion. Upon information and belief, the settlements also ended governmental investigations into potential civil and criminal liability against some of these directors and officers. The decision to approve the settlements was a self- interested act designed to protect these directors’ personal interests regardless of its impact on the Company.

118. Director Sullivan was, at all relevant times, the Chief Executive Officer and/or a senior executive officer of AIG. As CEO, Sullivan is exposed to civil and criminal liability pursuant to federal and state law. For serving in his AIG capacities,

Sullivan has received and continues to receive substantial monetary compensation and other benefits. Sullivan benefited from the Restatements and settlements by casting prior management in a negative light in order to set an artificially low threshold for evaluating his future performance.

119. Director Zarb was a director on the Audit Committee from 2001 to May

31, 2005 and Interim Chairman from March 28, 2005 until October 31, 2006. As a director, he should have been kept informed of audit documents showing that the

Restatements consisted of improper and unwarranted accounting provisions. As an Audit

Committee director, he had obligations pursuant to federal and state laws and can be held personally liable for breaches of those obligations. Defendant Zarb had an interest in ensuring that the Restatement cast prior management in a negative light.

67 120. Defendant Tse was and remains a senior executive officer serving in such position at the pleasure of Mr. Sullivan. For serving in his capacities, Tse has received and continues to receive substantial monetary compensation and other benefits. Tse benefited and continues to benefit from the Restatement and settlements by casting prior management in a negative light in order to set an artificially low threshold for evaluating his future performance.

COUNT I

THIRD-PARTY CLAIM FOR CONTRIBUTION

121. Mr. Greenberg incorporates by reference and realleges each and every allegation contained in paragraphs 1 through 72 of his Answer to the Amended

Complaint and paragraphs 1 through 120 of the Third-Party Complaint above as if fully set forth herein.

122. The Amended Complaint alleges that Mr. Greenberg is liable for (i) alleged breaches of fiduciary duties, and (ii) indemnification as a result of alleged wrongful misconduct and wrongdoing that injured AIG.

123. Mr. Greenberg believes the Amended Complaint is without merit and intends to defend himself vigorously. In the event, however, that Mr. Greenberg is held liable to make any payment as a result of the claims asserted against him in this action, then, in accordance with applicable Delaware state law and any other applicable law, Mr.

Greenberg is entitled to and demands contribution from the Third-Party Defendants to the full extent permitted by law for any damages Mr. Greenberg is ordered to pay, plus Mr.

Greenberg’s reasonable costs and expenses in this action including attorneys’ fees.

68 WHEREFORE, for the above listed reasons, Mr. Greenberg respectfully requests that this Court enter Judgment for Mr. Greenberg as follows:

1. Dismissing Plaintiff’s Amended Complaint with prejudice;

2. Awarding Mr. Greenberg his reasonable costs and expenses, including

attorneys’ fees;

3. In the event Plaintiff is awarded any relief against Mr. Greenberg, entering

judgment for Mr. Greenberg on Count I of his Third-Party Complaint against

the Third-Party Defendants for contribution to the fullest extent permitted by

law for any and all liability established by the Plaintiff against Mr. Greenberg;

and

4. Granting such further and other relief as this Court deems just and proper.

/s/ Kevin G. Abrams______OF COUNSEL: Kevin G. Abrams (Del. Bar I.D. 2375) J. Travis Laster (Del. Bar I.D. 3514) Nicholas A. Gravante, Jr. ABRAMS & LASTER, LLP Robert J. Dwyer Brandywine West, Suite 303 Steven I. Froot 1521 Concord Pike Scott Bassinson Wilmington, Delaware 19803 Christopher E. Duffy Telephone: (302) 778-1000 BOIES, SCHILLER & FLEXNER LLP Facsimile: (302) 778-1001 575 Lexington Avenue New York, New York 10022 Attorneys for Maurice R. Greenberg Telephone: (212) 446-2300 Facsimile: (212) 446-2350

David Boies BOIES, SCHILLER & FLEXNER LLP 333 Main Street Armonk, New York 10504 Telephone: (914) 749-8200 Facsimile: (914) 749-8300

Dated: June 20, 2007