Former Head Of AIG Unit Shipped Confidential Material With Wife’s Credit Card, Insurer Claims

Copyright 2010 SNL Financial LCAll Rights Reserved SNL Insurance Daily

February 5, 2010 Friday

854 words

Former head of AIG unit shipped confidential material with wife's credit card, insurer claims

David Dankwa

The legal fight between AIG and the former president of its global real estate group is about to get noisy.

During a 22-year career at American International Group Inc., terminated shortly after federal authorities seized and rescued the insurer from the brink of bankruptcy, Kevin Fitzpatrick earned millions of dollars in compensation as president of the company's global real estate investment operations and was widely considered an untouchable figure within the corporate structure.

In his heyday, Fitzpatrick oversaw numerous investment funds that acquired and managed myriad real estate investments around the world, and was signatory to dozens of special purpose vehicles that distributed profit interests to him and other AIG Global Real Estate employees. Today, Fitzpatrick and his former employer are embroiled in a legal fight over his purported share of profit interest distributions totaling about $130 million and a dispute over confidential materials, amounting to 45,000 pages and 9.63 gigabytes of sensitive information, allegedly stolen from AIG headquarters.

If AIG is to be believed, Fitzpatrick clandestinely began removing the documents belonging to AIG Global Real Estate just weeks after the dramatic government rescue of the insurer in September 2008 and just days after he was informed that the real estate group he headed was on a to-be-sold list.

Allegedly using false return addresses and his wife's personal credit card to conceal his activities, Fitzpatrick loaded confidential information into boxes and onto compact discs and memory sticks and had them shipped to his home in New Jersey, AIG claims in a countersuit filed in Manhattan Federal Court.

AIG claims that the stolen material included "almost every single possible document necessary to recreate certain real estate investment portfolios, including but not limited to appraisals, valuations, and real estate investment committee memoranda."

On May 8, 2009, the insurer claims that its internal audit department caught Fitzpatrick's attempting to ship material to his home. A package, intercepted in the AIG Global Real Estate mailroom, included a listing of the group's employees in the U.S., India, Korea, London, Moscow, Zurich, Mexico and Japan, as well as salary and bonus information, and detailed background of cash flow data concerning the real estate portfolio.

As a result, Fitzpatrick's access to e-mail and AIG premises were cut off, and he was subsequently fired May 12, 2009.

Fitzpatrick's account of the events that led to his termination differs substantially. First, he denies the allegations that he stole confidential information, calling the charges "baseless, ham-handed and [an] obviously tactical assertion."

In a suit filed against AIG on Dec. 9, 2009, Fitzpatrick claims that following the AIG bailout and the announcement to sell various assets, he and his team, in conjunction with consultants from Blackstone Group LP and Merrill Lynch & Co. Inc., now part of Bank of America Corp., began to work around the clock to prepare the AIG Global Real Estate portfolio for sale.

Fitzpatrick said AIG was well aware that he maintained a home office and often reviewed company documents outside of his office. At the time of his termination, Fitzpatrick claims he had been specifically ordered to review voluminous materials in connection with a KPMG LLP audit of certain real estate investments. Additionally, he was reviewing materials to be used in the sale of AIG Global Real Estate's portfolio, including a listing of properties, buildings and awards.

Nearly three months before his termination, Fitzpatrick said he submitted a letter of resignation in which he decried a systemic effort to strip him of his executive authority over the day-to-day operations of AIG Global Real Estate in violation of a 2001 contract that gave him sweeping authority.

For instance, procedures imposed by Paula Reynolds, hired in 2008 as chief restructuring officer, were burdensome and allowed "people who possessed little or no understanding of global real estate management" to second-guess and analyze Fitzpatrick's business decisions in an untimely fashion, the complaint states. Fitzpatrick alleges that the resultant mismanagement of the real estate operations diminished the value of the assets and related partnership interests that he and others owned.

Also, the new procedures required Fitzpatrick to report to a newly created steering committee, which, according to him, "operated in an inefficient and unproductive manner."

Before AIG showed him the door, Fitzpatrick indicates he was already preparing to jump ship. He claims to have stuck around after submitting the resignation letter because he wanted to ensure that the group, which manages about $24 billion in assets, its employees and investors would not be harmed by his departure. In recent months, the Fitzpatrick case has moved out of New York State Court to the Manhattan Federal Court, where a team of AIG lawyers is seeking an outright dismissal of the complaint.

Meanwhile, Fitzpatrick, who argues that he built AIG Global Real Estate from nothing into a profitable, sophisticated global real estate investment business, appears unwilling to walk away without a good fight.

February 11, 2010