Report: Greenberg Target of Fed Stock Probe

Federal prosecutors are investigating whether Maurice R. Greenberg (search) headed an effort to manipulate the stock price of American International Group Inc. (AIG) in his final weeks as chief executive of one of the world's largest insurance companies, the New York Times reported in Friday's editions.

The Times, citing unidentified people officially briefed on the inquiry, said an executive with the company's trading group told the company late last week that he had talked with Greenberg about AIG's stock price in February, when it had begun to fall sharply. People who listened to a recording of the conversations say Greenberg can be heard instructing the trader to buy shares of AIG (search), the newspaper said. Such purchases may violate federal securities law.

The conversations between the trader and Greenberg were captured on a recording system used by the trading division, the sources said. The recordings were reviewed by the company and its lawyers, and then turned over to prosecutors with the U.S. attorney's office in Manhattan and the Securities and Exchange Commission (search).

Federal prosecutors have since subpoenaed all of AIG's recordings from its trading group, which are said to date back as much as two years, the sources said.

Since the beginning of the year, federal and state officials have been examining transactions AIG used to make its financial position appear stronger than it really was.

Greenberg remains a focal point in the investigation despite being forced to step down as head of the company. Greenberg, who turned 80 on Wednesday, resigned as chief executive of AIG on March 14 and as chairman later that month.

"We cannot comment because we don't have the tapes, transcripts nor the substance of the conversation contained on them," Howard Opinsky, a spokesman for Greenberg's legal team told the Times.

Greenberg has not been accused of wrongdoing by regulators, but he has previously been investigated in connection with possible market manipulation.

The SEC, the New York attorney general's office, the New York Insurance Department (search) and the Justice Department have been examining Greenberg's role in initiating a transaction with General Re (search), a reinsurance subsidiary of Berkshire Hathaway Inc. (BRKA), that allowed AIG to bolster reserves artificially against future claims — an important measure of an insurer's strength.

AIG said in late March that it did not account correctly for that transaction and others. An AIG spokesman declined to comment to the Times Thursday on the latest investigation. The company is cooperating with all inquiries.