Mr. Greenberg, 79 years old, realized the predicament and retired before he was pushed, these people say. Through his attorney, David Boies, Mr. Greenberg declined to comment for this article. AIG also declined to comment, according to a spokesman.

INSURANCE DISRUPTION • Page One: SEC Brings New Federal Oversight to Insurance1 04/01/05   • Tracking the Numbers: AIG Revelations May Not Be Over2 04/01/05   • AIG's Admission Puts Spotlight on Auditor PWC3 04/01/05   • Page One: AIG Admits 'Improper' Accounting4 03/31/05   • Page One: Buffett Was Told Ahead of Time of Deal With AIG5 03/30/05   • Page One: Buffett Is Called for Questioning on AIG6 03/29/05   MORE • AIG's press release on delay of annual report7   • Timeline: A Rock in the Insurance Industry8   • See a timeline of key AIG events9.

That announcement capped an intense two-week drama in which Mr. Greenberg's hard-driving style came back to haunt him. It also demonstrated the power of a regulatory ultimatum in a climate in which boards must move quickly and decisively.

By Wednesday, in an extraordinary confession, AIG admitted to a broad range of improper accounting that could slash its net worth by as much as $1.77 billion, a stinging rebuke to Mr. Greenberg's tenure and leadership.

Regulators and criminal prosecutors now are examining any involvement by Mr. Greenberg in transactions made to improperly bolster AIG's financial picture, in addition to whether he may have misled investors and governmental authorities, people familiar with the matter say.

Mr. Greenberg, one of the most powerful executives in the financial world, has dominated his industry for decades. He took an obscure property-casualty company and over nearly 40 years built it into one of the world's premier financial companies. AIG, which had revenue of $98.61 billion last year, does business in 130 countries, and Mr. Greenberg is on a first-name basis with world leaders, particularly in Asia, where the company was founded in 1919. A prominent Republican donor, Mr. Greenberg's views often are sought out by Republican leaders on international trade policy and insurance matters.

The dramatic end of Mr. Greenberg's 37-year reign as head of the world's largest business insurance company was extraordinary for the financial titan who ruled AIG as a personal fiefdom. Indeed, as the events unfolded, Mr. Greenberg railed against what he viewed as a palace coup, people familiar with the matter say.

He called and yelled at several directors, including longtime friends Frank Zarb, former chairman of the National Association of Securities Dealers, and retired attorney Bernard Aidinoff, for "turning" on him and leading a "boardroom revolt," the people say. Shortly after the probe began, he complained about the "McCarthy-istic" legal and regulatory atmosphere that he believed attacked him unfairly, the people say. Mr. Zarb and Mr. Aidinoff declined to comment.

For decades, the health-conscious chief roamed AIG's corporate headquarters and many of its offices around the world, several AIG current and former executives say. In his executive suite filled with Chinese artifacts, Mr. Greenberg had his own elevator guarded by his own security detail, his own living room adjoining his office and private chandeliered dining room.

At some monthly management meetings, executives sat around a conference table in coats and ties without refreshments. Mr. Greenberg, occasionally in shirt sleeves, was served hot tea in a china cup by his butler, a former colleague says. At certain times, when AIG executives traveled with him on business, they were required to use the small pilots' bathroom in the front of a corporate plane. A large, fancy bathroom in the back of the plane could be used only by Mr. Greenberg, his wife and their Maltese dog, Snowball, according to a former AIG executive.

Over the years, AIG employees and directors rarely challenged Mr. Greenberg because of his highly successful track record running the company, current and former AIG executives say. At board meetings, directors often refrained from asking questions because they didn't want to appear ignorant or to challenge Mr. Greenberg's authority, people familiar with the meetings say.

At a recent board meeting, one director asked Mr. Greenberg if the board shouldn't consider lessening the conflicting ties between AIG and related entities essentially controlled by Mr. Greenberg, the people say.

"That would be stupid!" Mr. Greenberg said, according to these people. Now, the company and regulators are examining the relationships between AIG and these private companies and whether they should be split off.

The first threat to Mr. Greenberg's power over AIG surfaced on Feb. 9, when the New York Attorney General and the Securities and Exchange Commission issued subpoenas to AIG. Regulators asked questions about the company's nontraditional insurance products, a reinsurance transaction with a unit of investor Warren Buffett's Berkshire Hathaway Inc., and the accounting for such deals.

Well aware that their legal exposure had increased in the wake of recent corporate scandals, AIG's outside directors hired their own attorney, Richard Beattie, chairman of Simpson Thacher & Bartlett.

Advised by their own counsel, the directors were able to get information on the investigation directly from regulators; previously, they had depended on Mr. Greenberg to inform them of developments.

As every day provided new and disturbing details from the investigation, the directors became worried that Mr. Greenberg initiated or knew about some of the transactions under scrutiny.

On Sunday, March 13, the outside directors, including such marquee names as ex-U.S. Secretary of Defense William Cohen, former U.S. ambassador at the United Nations Richard Holbrooke and Harvard economics professor Martin Feldstein, gathered in a conference room at Mr. Beattie's law firm for a nearly 10-hour meeting. They discussed the regulatory probe and what they should do about the company's relationship with Mr. Greenberg.

AIG's lead director, Mr. Zarb, a longtime executive in the securities industry accustomed to regulatory supervision, got the meeting under way. As directors began the discussion, Mr. Greenberg called in periodically on a speaker phone, where he was connected from his boat in Florida, the people say.

"You couldn't even spell the word insurance," he said to the group, according to people familiar with the situation. Later, he called again, this time from the corporate jet, to criticize Mr. Zarb and others for being led around by lawyers, the people say. As the meeting wore on, a consensus developed that Mr. Greenberg could be a stumbling block in resolving the regulatory issues if he continued as chief executive, according to people familiar with the matter.

As a compromise, they were willing for him to remain AIG's chairman through an "orderly transition," at least until the annual shareholder meeting in May. Mr. Greenberg agreed to retire the next day, March 14, as AIG chief executive, only the second CEO in the company's history.

On Tuesday evening, March 15, the directors held a previously scheduled dinner, before the next day's regular board meeting. Some directors privately asked Mr. Greenberg if he'd rather cancel it after the tumultuous days before, the people say. He refused. When the directors assembled in a private dining room at the posh St. Regis Hotel in Manhattan, the tension was thick, say people familiar with the event. Mr. Greenberg, typically ebullient, was subdued, they say.

Few people talked. When they did, the conversation was awkward, the people say. Mr. Greenberg sat for most of the meal with his arms crossed. Finally, Mr. Aidinoff, Mr. Greenberg's friend for 40 years, stood up to offer a toast to a "great, great friend" and the man who made "AIG the great company it is today." With that, all the directors rose and held up their glasses to the longtime chief.

Mr. Greenberg didn't respond. After an awkward period of silence, he muttered, "Let's go home now," and strode out, these people say.

Mr. Greenberg left the next day for a 10-day business trip to Asia, where he got the kind of royal treatment to which he was more accustomed. In Beijing, he stayed in a Chinese government guesthouse and received the Marco Polo Prize, an award for his contributions to Sino-U.S. relations.

But he was never far from the drama unfolding back home. Regulators and internal investigators continued to find more problems with how certain transactions were accounted for, particularly entities headed by Mr. Greenberg. Under the microscope are two closely held companies that are owned and run by current and former AIG executives, with Mr. Greenberg as their chairman. Along with a foundation run by Mr.Greenberg, C.V. Starr, an insurance brokerage firm that does business with AIG, and Starr International Co., which is used for a deferred-compensation plan for AIG management, own nearly 16% of AIG's shares outstanding.

Within days, the outside directors agreed that AIG needed to cut all ties with Mr. Greenberg even before the shareholder meeting, according to people familiar with the situation.

Mr. Greenberg, who was hearing rumblings about the effort to oust him, began calling his longtime friends, a person familiar with the situation says. He lamented to Citigroup Chairman Sanford "Sandy" Weill and former Secretary of State Henry Kissinger about his situation, according to this person.

Mr. Weill is out of the country and couldn't be reached for comment. Dr. Kissinger recently had angioplasty, and couldn't be reached for comment.

Mr. Greenberg's friend and ex-Lehman Brothers executive Pete Peterson, who isn't on AIG's board, made direct appeals to certain directors to allow a "dignified transition" for Mr. Greenberg, essentially pleading for a soft landing, according to other people close to the situation. Mr. Peterson didn't return a call for comment.

But Mr. Greenberg wasn't ready to throw in the towel. He counted the votes on the board, and didn't think it could oust him as chairman, according to one person familiar with the situation.

He expected the six inside directors, including the new CEO Martin Sullivan, his chosen successor, would support him. He also counted on at least two of the 10 outside directors, Frank Hoenemeyer, retired Prudential Insurance Co. of American vice chairman, and former U.S. Trade Representative Carla Hills, to support him.

Contemplating a worst-case scenario, Mr. Greenberg talked with securities-law expert Martin Lipton about fighting a proxy contest if he wanted to stay on as chairman beyond the May shareholder meeting.

Then came the "document caper," as Mr. Spitzer dubbed it, which shocked the board.

In Bermuda, the lawyers tussled over whether AIG or Mr. Greenberg could "seal and secure" the documents and records from the AIG-related companies essentially controlled by Mr. Greenberg. Both camps exchanged angry e-mails.

Documents already moved out of the AIG office in Bermuda were stored in a secure facility for safekeeping by the law firm of Mr. Greenberg's attorney, the people say.

On Sunday, AIG's Mr. Sullivan dispatched security guards from AIG corporate headquarters in New York to Bermuda. The guards are to insure that no documents are removed without authorization.

Mr. Greenberg, by then in Europe, began to grasp the growing board and regulatory sentiment against him, according to people close to the situation. He complained to friends that no one was running AIG, and contemplated jumping before he was pushed, a person familiar with the matter says.

As directors conferred on a series of conference calls, a consensus emerged to ask Mr. Greenberg to retire as chairman. But one AIG director, Mrs. Hills, urged her colleagues to recognize Mr. Greenberg's vast contributions to AIG, people familiar with the matter say. Mrs. Hills, who couldn't be reached for comment, suggested that Mr. Greenberg be named "director emeritus," the people say.

No one agreed.

Write to Monica Langley at monica.langley@wsj.com¹⁰