Greenberg Calls New York Fraud Suit Waste of Time, Money

By and | January 30, 2015

Ex-American International Group Inc. Chairman Maurice “Hank” Greenberg said New York’s pursuit of him through a decade-old fraud suit is a waste of taxpayer money, as the two sides prepare for a trial next month.

The suit has “fallen apart” since it was filed by then- Attorney General Eliot Spitzer in 2005, as successors have been forced to abandon claims including damages, and all that is left is a case seeking “meaningless and duplicative relief,” Greenberg, 89, said in a pre-trial memo filed Thursday.

The New York Attorney General’s office “has 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,” Greenberg said. “This waste of court time — the trial will take at least four months — and of taxpayers’ dollars should have ceased long ago.”

The parties are scheduled to begin a nonjury trial before New York State Supreme Court Justice Charles Ramos on Feb. 24. The state, whose case is now led by Attorney General Eric Schneiderman, claims Greenberg and Smith are responsible for sham transactions with General Reinsurance Corp. in 2000 and 2001 that inflated AIG’s loss reserves by $500 million.

Largest Insurer

Greenberg stepped down as AIG’s chief executive officer in March 2005, the same month the New York-based insurer said the transaction with Gen Re was improper. He had led the company since 1967 and built it into the world’s largest insurer. AIG paid $1.6 billion to settle regulators’ claims, and Spitzer sued Greenberg and Smith two months after that.

Schneiderman, a Democrat, is seeking disgorgement of cash bonuses they received — $49 million from Greenberg and $6 million from Smith — and wants to bar the men from participating in the securities industry or serving as officers or directors of public companies.

Matt Mittenthal, a spokesman for Schneiderman, said in a statement Thursday that Greenberg and Smith “knowingly orchestrated two major frauds” that led to their ouster.

“For both alleged frauds — a phony $500 million reinsurance deal with Gen Re, and a scheme to hide $200 million in underwriting losses –- we will prove that the illegality was obvious to Greenberg and Smith, who either directed or were personally involved in both of them,” Mittenthal said.

The case is State of New York v. Greenberg, 401720-2005, New York State Supreme Court, New York County (Manhattan).

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