Ex-AIG chief Greenberg tells New York AG to drop fraud case

Posted Jan. 29, 2015, at 7:50 p.m.

NEW YORK — With a scheduled trial just four weeks away, the former chairman of American International Group Inc. said New York’s attorney general should abandon his nearly decade-old fraud case against him, calling it a waste of taxpayer dollars in pursuit of a hollow “trophy” victory.

Maurice “Hank” Greenberg, 89, said Attorney General Eric Schneiderman’s lawsuit has “fallen apart” over time, with damages claims and many legal accusations dropped, and it made no sense to spend a potential four months in court arguing over what is left.

Schneiderman’s office has “lost all perspective” of its enforcement role, and become “so blinded in the pursuit of a perceived trophy that it is prepared to rely on testimony that it knows to be false in an effort to obtain relief that it knows to be meaningless,” his defense lawyers said in a court filing.

The nonjury trial, scheduled for Feb. 24 in Manhattan before state Supreme Court Justice Charles Ramos, accuses Greenberg and former AIG Chief Financial Officer Howard Smith of arranging fraudulent deals hide AIG’s true financial condition.

The defendants must still face claims they orchestrated a $500 million transaction with reinsurer Gen Re, a unit of Warren Buffett’s Berkshire Hathaway Inc., to boost loss reserves without transferring risk; and a deal with Capco Reinsurance Co. that hid a $210 million underwriting loss in an auto-warranty program.

While Schneiderman and his predecessors, Eliot Spitzer and Andrew Cuomo, once sought billions of dollars in damages, the case is now far smaller.

Schneiderman now seeks to ban the defendants from the securities industry and from serving as officers or directors of public companies, and to recoup roughly $55 million of bonuses and interest covering the 2000-2005 period when the fraud allegedly took place.

“The overwhelming strength of the state’s case … has not changed,” the state said in its court filing, also on Thursday. “The Gen Re and Capco transactions were major frauds. They were personally engineered by Greenberg and Smith.”

The office said both men will be called to the stand.

Greenberg is still hoping for a last minute reprieve from an appeal argued in December. The judges have not yet ruled.

He is chairman and chief executive of privately held C.V. Starr & Co. Smith, 70, is a director and the vice chairman for finance of C. V. Starr.

 

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