AIG toning down rhetoric with Greenberg, agrees to arbitration

New CEO Robert Benmosche made good on his promises to change the tone at AIG (AIG). First he slowed sales of assets, now he wants to work toward settling legal disputes with Hank Greenberg, agreeing to binding arbitration if necessary to end their long-running legal battles.

Benmosche told the Wall Street Journal that the legal disputes are "disruptive." In a interview with the Journal, Benmosche said he wants Greenberg's criticism and support. While Benmosche admitted the world is not very happy with Greenberg's track record, he does think he can help with the solutions.

So getting a process in place to settle lawsuits or arbitrate them will go a long way to building a working relationship between Greenberg and Benmosche. The fact that a judge rejected the claim that a company run by Greenberg breached its duty to AIG by selling $4.3 billion of AIG stock probably played a big role in AIG realizing settlement was the best route to go.

U.S. District Judge Jed Rakoff ruled that Greenberg's firm, Starr International (SICO), did not violate a duty to hold AIG shares after 2005. During trial AIG claimed an oral trust was created in 1970 solely for the benefit of AIG and its deferred compensation program. AIG said SICO breached that trust in 2005 to retaliate for Greenberg being ousted. Rakoff ruled that AIG failed to provide enough evidence of the oral trust.

Benmosche is doing the right thing to get these legal distractions behind AIG and work instead on rebuilding the company, if AIG is going to have any chance of regaining its financial strength. Maybe AIG finally has the right leader after four tries.

Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies.

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