Sunday, April 12, 2009

New School University Got $14 Million In A.I.G.-Linked Foundation `Bonus' Grants

Since 2004, New School University has been given over $14 million in “bonus” grants from a foundation which is financed largely by stock of the U.S. government bailed-out American International Group [A.I.G] and run by A.I.G insiders and former executives. As a press release that was posted on the New School University’s web site on November 4, 2004 noted:

“…New School University announced that it has received…gifts…The Starr Foundation has given a grant of $10 million - the largest foundation gift in the University’s history - to establish the India China Institute (ICI)….

“We are very grateful to The Starr Foundation for this $10 million grant…,” said New School University President Bob Kerrey. “One of the things I came to recognize as a member of the 9-11 Commission is that: the homeland is the planet….The Starr Foundation’s funding of the India China Institute is fundamentally important for collaborative work among scholars and policy-makers here at The New School and abroad….”

“The Starr Foundation was established in 1955 by Cornelius Vander Starr, an insurance entrepreneur who founded the American International family of insurance and financial services companies, now known as American International Group, Inc. …He died in 1968 at the age of 76, leaving his estate to the Foundation. The Foundation currently has assets of approximately $3.5 billion, making it one of the largest private foundations in the United States… “

An additional “bonus” grant of $4 million was given to New School University in 2007 by the A.I.G.-linked Starr Foundation, according to the foundation’s Form 990 financial filing for 2007.

In May of 2008, 15.5 million shares of A.I.G stock were owned by the Starr Foundation. Until the end of 2006, 39.1 million shares of A.I.G stock—then worth about $2.8 billion-- were owned by the Starr Foundation. But “as the stock price began to slip in recent years, the foundation sold about 30 million shares of A.I.G stock between January 2006 and May 2008, or about two-thirds of its holdings,” according to an article, titled “Starr Foundation Plans Smaller Grants After A.I.G Stock Plunges,” that was posted on the site on September 24, 2008.

The Starr Foundation’s Chairman, Maurice (Hank) Greenberg, was A.I.G.’s Chairman and CEO from 1989 until 2005 and is, coincidentally, the past Chairman, Deputy Chairman and Director of the Federal Reserve Bank of New York that promoted the recent use of U.S. government taxpayer money to provide corporate welfare grants and bail-out funds for A.I.G. executives. Starr Foundation Chairman and former A.I.G. Chairman and CEO Greenberg was also accused in 2005, in a lawsuit initiated by former New York State Attorney General and former New York Governor Eliot Spitzer, of defrauding the Starr Foundation. As an article by Gretchen Morgenson that appeared in the December 15, 2005 issue of the New York Times reported:

“Eliot Spitzer, the New York attorney general, submitted a report yesterday as part of his lawsuit against Maurice R. Greenberg, the former chief executive of American International Group, contending that Mr. Greenberg unfairly enriched himself and other A.I.G. executives in a series of transactions that violated the will of Cornelius Vander Starr, the company's founder, and defrauded a foundation he created.

“The questionable transactions took place more than 35 years ago as the far-flung insurance operations built by Mr. Starr starting in 1919 were being melded into A.I.G., the report said. After Mr. Starr died in 1968, Mr. Greenberg and his colleagues, as executors of his estate, benefited by selling assets at fire-sale prices to companies they controlled, it stated.

“Almost immediately, the report said, these executives turned around and sold the assets at far higher prices to A.I.G., which then set some of them aside for use as a compensation pool for the company's executives. Because those shares ultimately amounted to 12 percent of A.I.G.'s outstanding stock, Mr. Greenberg was able to cement his control of the company.

“According to the report, Mr. Greenberg and his associates cheated the Starr Foundation…by selling assets that were worth more than $30 million for just $2 million.

“`Mr. Greenberg and the other executors directed a series of transactions that advanced their own interests in controlling A.I.G. at the expense of the foundation,’ said Michele Hirshman, first deputy attorney general…

“Yesterday's report turns up the volume in an already vehement battle between Mr. Spitzer and Mr. Greenberg, who was ousted by the A.I.G. board in March, when he refused to testify to regulators about a questionable insurance transaction.

“Mr. Spitzer has decided not to pursue possible criminal charges against Mr. Greenberg. But he still has a civil case against him, as well as against Howard I. Smith, the former chief financial officer of A.I.G., and A.I.G. itself, contending that they manipulated financial statements and misled regulators and investors. The company, which is in settlement talks with Mr. Spitzer's office, has restated its financial results for the last five years to reflect accounting practices it now says were improper…

“Even though the transactions occurred more than three decades ago, Ms. Hirschman of the attorney general's office said that the six-year statute of limitations relating to actions taken by a fiduciary starts running only when the fiduciary resigns from a position of trust. Mr. Greenberg remains chairman of the Starr Foundation, a title he has had since 1981.

“Many of the facts cited in the attorney general's report emerged in documents that Mr. Spitzer's office seized in March from A.I.G.'s offices in Bermuda. Mr. Spitzer secured the documents after receiving a tip that lawyers for Mr. Greenberg were removing boxes from A.I.G.'s offices.

“The documents, in some 80 boxes, included meeting minutes and correspondence that `raised questions about whether the estate had been appropriately compensated for certain assets,’ the report said.

“Among those documents was a memo written by a trustee of the Starr Foundation stating that just before his death in December 1968, Mr. Starr `was planning to change drastically the nature of the foundation, including its personnel, and to divorce it entirely’ from C. V. Starr & Company affairs. To achieve this end, certain unidentified board members tendered their resignations in September 1968, the report said, but in February 1969, two months after Mr. Starr died, they returned to the foundation's board.

“Mr. Starr left almost his entire holdings to his foundation. The executors of his estate were Mr. Greenberg and the other directors of C. V. Starr, who controlled a majority of the shares of all three Starr entities. As president of C. V. Starr, Mr. Greenberg oversaw the disposition of Mr. Starr's assets under the gaze of the Surrogate's Court. Mr. Starr had been Mr. Greenberg's mentor, giving him his first job in the insurance industry.

“Most of the other Starr executors were also directors of the Starr Foundation, which by law could not own stakes in private companies. This put the executors in a position of conflict - they had a duty to sell the Starr assets for the highest price to benefit the foundation but they also had an interest in keeping the price low because they owned the entities buying the shares.

“Mr. Spitzer's report contends that three asset sales victimized the Starr Foundation. In one deal, Mr. Starr's executors sold shares in a company known as Far East for $1 million in cash to the company they controlled, even though the holding was worth $7.2 million.

“The second transaction involved Mr. Starr's 24 percent stake in C. V. Starr, a domestic insurer. According to the report, Mr. Greenberg said the foundation should buy the shares using a formula that the directors of C. V. Starr had decided upon without `independent advice'. The cash proceeds were $1.08 million, even though Morgan Stanley at the time had estimated the value of the stake at $25 million to $30million.

“Finally, the sale of shares in Starr International, a unit that owned foreign insurers, appears to have defrauded the foundation, Mr. Spitzer's report said. Those shares, which constituted a 20 percent stake in a company that in September 1970 was worth $100 million, were sold back to Starr International, controlled by Mr. Greenberg and other executors, for $3,000.

“Mr. Greenberg also misled the Surrogate's Court overseeing Mr. Starr's estate, the report said. His sworn statement, filed in 1978, failed to disclose critical facts on all three transactions; there was no mention of Morgan Stanley's estimated value of the C. V. Starr stake, for example…”

Coincidentally, the A.I.G.-linked foundation that gave New School University $14 million in “bonus” grants is also linked to New York University [NYU]. Starr Foundation President and board member Florence Davis sits on the board of trustees of NYU and NYU’s School of Law

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