Over his long career, Los Angeles billionaire Eli Broad has taken on several identities: from entrepreneur to corporate executive to venture philanthropist and civic leader.

Shareholder activist was never on the list.

But that was before the mortgage-related financial struggles at American International Group Inc. accelerated this month into meltdown territory, with its share price dropping nearly a third since May.

For Broad, who sold his SunAmerica financial company to AIG nine years ago for $18 billion in cash and stock, that decline on top of a prolonged slide translated into nearly $750 million in paper losses for him, his trusts and foundations.

“I’m no activist, no Carl Icahn, but I felt a responsibility to SunAmerica shareholders when I saw this great company AIG just deteriorating,” said Broad, in an interview last week with the Business Journal.

Broad, who owns or controls around 27 million AIG shares, played a behind-the-scenes role in last week’s shakeup of the New York-based financial conglomerate’s top management and board.

And while never media shy when it involves causes he supports such as redeveloping downtown’s Grand Avenue or funding the Walt Disney Concert Hall he was surprisingly public in his efforts regarding AIG.

Broad and two allies sent a June 12 letter to AIG’s board demanding management changes. He also appeared on cable television business shows pleading his case.

Broad, who despite the losses still has estimated net worth approaching $7 billion according to an estimate by the Business Journal, may have been particularly sensitive about the losses because many friends and former SunAmerica associates with AIG shares saw their retirement nest eggs shrink too.

Broad said he was prompted to step up the pressure on AIG after it reported its second consecutive quarterly loss in May. That $7.8 billion loss was the largest in the company’s history. Its mortgage related losses now total $20 billion.

“We finally decided that we were tired of being quiet about this,” said Broad, who retired from AIG’s board himself in 2003 after serving as chairman.

Big changes

Broad essentially got what he wanted.

Directors at AIG finally took action on June 15, naming former Citigroup Inc. executive Robert Willumstad to replace Martin Sullivan as chief executive. Willumstad had been AIG’s board chairman since 2006.

Sullivan had replaced Maurice “Hank” Greenberg, a Broad friend who over four decades had built AIG into the world’s largest insurance company. That was before he was forced out in 2005 by former New York State Attorney General Elliot Spitzer amid a probe into AIG’s accounting.

“There was a lack of confidence,” said Broad. “Martin Sullivan is a fine man, but his whole background has been in commercial insurance. The problems in the company were in the asset side. We felt that the company needed a different type of top management, which they now have with Willumstad.”

In addition to the management change, the board decided to name as lead independent director former Hilton Hotels Corp. Chief Executive Stephen Bollenbach, a friend of Broad’s who had only been elected a director in January. Broad insists he didn’t have a direct hand in Bollenbach’s promotion within the board.

“The board knew that I and a lot of other people had a high regard for him, but we had no role in that; it was up to the board,” he said. “Bollenbach did a fantastic job as a financial executive at Disney and later as CEO at Hilton. I think he and Robert Willumstad have the ability to strengthen top management in finance and investments, because they both have superb backgrounds in those areas.”

AIG’s shares have continued to be volatile since the leadership changes were announced, with shares closing at $33.07 on June 19. However, Broad expects future growth of $5 to $7 per share.

“The market reaction has been a bit over done. All these headlines, write-downs and government inquiries have stained (the company’s) reputation. It will take time for it to get that back,” he said. “But AIG is a fine company with a great international franchise, and in the insurance world they’re still highly regarded as the best.”

A Rough Ride

Broad is among several of Los Angeles’ richest men who sold their companies to AIG years ago and who have seen the formerly solid and safe AIG shares they received in return lose value.

Also amassing significant losses on paper in the current downturn are Steven Udvar-Hazy, chairman and chief executive of another AIG unit, International Lease Finance Corp. (ILFC), and his former partners, Louis and Leslie Gonda. AIG acquired their aircraft leasing company for $1.3 billion in cash and stock in 1990.

“AIG is an important part of the Los Angeles economy,” said Broad. “Not only do they own SunAmerica, ILFC and now 21st Century Insurance, they also have major regional offices here.”

The Business Journal in May ranked Broad No. 3 on its annual Wealthiest Angelenos list, with Udvar-Hazy at No. 11, and Louis and Leslie Gonda at No. 35 and No. 47 respectively.

Broad’s estimated net worth grew 6 percent over the past year to $6.9 billion due the diversity of his other holdings, but the Journal estimated as of early May that Udvar-Hazy’s net worth was down 20 percent, Louis Gonda’s down 32 percent and Leslie’s down 40 percent from a year ago.

Broad blamed the losses on the decision by AIG to plunge into complex derivatives known as credit default swaps. Swaps function as insurance policies to protect against loan defaults. The instruments had become an increasingly popular way for investors to diffuse risk in their subprime mortgage-based securities. But when it became clear that many more subprime mortgage holders than expected were unable to meet their obligations, holders of the swaps took huge losses, including many of Wall Street’s big investment banks.

“The growth in these (swaps) over the last five years has been phenomenal and it’s all been unregulated,” said Broad, who himself pulled a significant amount of cash out of the market prior to last summer’s credit crunch. “The financial service companies, the brokerage firms took poor mortgage credit and sliced it up, packaged it and got the rating agencies to give it AA and AAA ratings. We’re now paying the price for all of that.”