American International Group (AIG) and Hank Greenberg, its former chief executive and chairman, have settled a series of legal disputes that stemmed from Mr Greenberg's ousting amid a 2005 accounting scandal.

AIG, which also settled a case against Howard Smith, its former chief financial officer, said that it would pay up to $150 million (£90 million) to cover the two executives’ legal costs. The costs will be decided by an independent arbitrator.

Mr Greenberg built AIG into the world’s biggest insurance company during his 38 years at its helm. As part of the settlement, he will get access to its archives, which he needs to write his memoirs.

AIG will also release personal items to the 84-year-old that it had kept since Mr Greenberg left the company, including photographs and a Persian rug.

AIG had sued Mr Greenberg for $4.3 billion, which the insurer said was the value of stock that Starr International, Mr Greenberg’s investment company, misappropriated from an employee compensation plan.

AIG also wanted Mr Greenberg to contribute to the various settlements it had made with regulators.

Robert Benmosche, AIG’s new chief executive, said today that dropping the legal actions against AIG’s former boss would remove a significant distraction and expense to the company, which is attempting to repay its $120 billion government bailout.

Mr Greenberg said: “I look forward to assisting AIG in trying to preserve and restore as much value as possible for all of AIG’s stakeholders.”

Mr Greenberg was ousted from AIG in March 2005 after Eliot Spitzer, the then New York Attorney-General, discovered that the company had hidden insurance losses, overvalued its investment income and broken other accounting rules.

AIG paid a $800 million fine for the fraud and restated its accounts back to 2000, wiping more than $2 billion from its value.

In total, the company paid $1.6 billion to settle a range of charges it faced from various regulators over the fraud.

In August this year, Mr Greenberg paid $15 million to settle a civil case brought by the Securities and Exchange Commission, which had accused him of allowing the publication of documents that overstated AIG’s financial performance.

He also paid $130 million in August to settle suits brought by investors against AIG.

Mr Greenberg continues to contest some charges brought against him by Mr Spitzer. Others were dropped by the Attorney- General in 2006.

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