Shelp, who for more than a decade occupied an office down the hall from Greenberg at AIG, said he believed the company began investing in credit swaps tied to mortgages while Greenberg was still in charge.
"He was CEO at the time. The company has been doing credit swaps for more than three years," Shelp said. "I don't know what risk-management control would have been removed, but it doesn't make any sense that the board would do that."
Greenberg's losses come just four days after he settled a lawsuit filed by some AIG shareholders, including the Teachers Retirement System of Louisiana, over the same shady dealings that got him investigated -- but never prosecuted -- by Spitzer.
"The truth is, I can't help but feel sorry for him," said Stuart Grant, the lawyer representing the Louisiana teachers who won a $115 million settlement. "Ninety-five percent of his assets have disappeared. Maybe he's left with $1 billion, maybe several hundred million, to most mortals that's a heck of a lot of money, but think about all that work over all those years, and now it's all gone."
ABC News's Eileen Murphy contributed to this report.
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