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Greenberg (pg. 2)

By James Bandler, editor at large, with Roddy Boyd and Doris Burke
Last Updated: October 7, 2008: 10:10 AM ET

Greenberg has outlasted some foes. The ambitious prosecutor who first charged him, once called the "sheriff of Wall Street," acquired the moniker Client No. 9 and was catapulted back into private life. Two AIG CEOs have come and gone. Greenberg also may be able to deploy a secret weapon - two of them, in fact. When he left the company, he didn't retire - he kept control of two offshore companies that have been vital to the operations of AIG's business for more than 50 years. If in fact AIG is torn asunder and sold off in pieces, Greenberg vows to use those companies to try to scoop up the crown jewels.

* * *

Though never as well known as Warren Buffett or Sam Walton, Hank Greenberg stands as one of the few chief executives of the past quarter-century who could be called legendary. He took the reins of a financially frail and poorly integrated hodgepodge of property-and-casualty and life insurance companies and built it into a powerhouse, with $190 billion in market value and operations in 130 countries. Annual shareholder return during his reign was an impressive 14%. He was one of the country's most influential globalists, helping open doors for American service companies in Russia, India, China, and elsewhere.

He didn't run such a leviathan by being cuddly. "The people who report to Hank are put under pressure that could be considered unreal," one former executive told Fortune in 1980, in an issue that named Greenberg one of America's Ten Toughest Bosses. "If you consider it a sacrifice, then you're working at the wrong company," Greenberg responded. He groomed two sons as successors, then rode them so mercilessly that both left the company. Change was embraced at AIG, but not dissent. Early on, Greenberg dismissed internal resistance to his innovations as "the little thoughts that little men have."

Wall Street adored him. Shareholder meetings were love fests. "I just think you are the most stupendous, unbelievable person in the entire industry, the entire world," a shareholder gushed at one annual meeting. Replied Greenberg, to laughter: "If you think I'm going to disagree with you ..."

AIG started out as a company based in China, the creation of Cornelius Vander Starr, a self-made man who arrived in Shanghai in 1919 with just 330 Japanese yen in his pocket, according to company legend. The British already had several insurance operations in China, but they refused to hire Chinese managers or insure Chinese customers. Starr's company would be different. When he formed a property and casualty business and then a life insurance business, he hired prominent Chinese officials to serve on the boards. In 1926 he opened a New York office.

Starr's company developed close relations with the U.S. military and intelligence apparatuses. After World War II, Gen. Douglas MacArthur invited Starr to insure the property of U.S. occupation troops in Japan.

Greenberg joined Starr's company in 1960. He was born in New York City but moved to upstate New York after his father, a taxi driver, was killed in an automobile accident. Greenberg was only 6. His mother, Ada, a beautician, remarried a farmer, Hyman Mushkat. An indifferent student, Greenberg was always getting into trouble. He says he once was suspended from primary school for putting a skunk into the ventilation system. In 1942, at the age of 17, he persuaded a girlfriend to help forge a birth certificate so that he could enlist in the military. He landed on June 6, 1944, at Omaha Beach and participated in the liberation of the Dachau concentration camp. He remained in the Army Reserve after the war, and after getting a degree from New York Law School, went to Korea, where he received a Bronze Star.

Greenberg began his career at Starr as a vice president, with no organizational support and nothing but a tiny office and a pad of paper. He made an immediate impression. He saved the company's troubled American Home unit. A consummate salesman, he believed that if there was a risk, he could find coverage. He persuaded a Japanese company that sold yellow safety hats to schoolchildren to sell accident policies along with the hats, and emblazon the hats with the insurance company's name.

Closed markets, he felt, were there to be opened. He traveled to Moscow in 1964 and was greeted with suspicion. "Do you know what that building is?" his minders asked on his first day, showing him Lubyanka, the headquarters of the KGB. Greenberg shook his head.

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