Greenberg Wants State’s High Court to Nix New York AG’s Fraud Case

By | April 22, 2015

In a last-ditch effort to avoid trial, former American International Group Inc Chairman Maurice “Hank” Greenberg is seeking permission to ask New York’s highest court to throw out the accounting fraud case against him.

Greenberg, who turns 90 next month, failed last week to persuade a mid-level state appeals court to dismiss the 2005 lawsuit, now led by state Attorney General Eric Schneiderman.

On Tuesday, Greenberg’s lawyers asked that court for permission to appeal its unanimous decision to the top state court, the Court of Appeals.

Schneiderman wants Greenberg to forfeit millions of dollars in alleged ill-gotten bonuses from AIG, which he led for nearly four decades, and banned from the securities industry and from serving as an officer or director of a public company.

Maurice R. Greenberg, chairman and CEO of Starr Insurance Holdings Inc.
Maurice R. Greenberg, chairman and CEO of Starr Insurance Holdings Inc.

Greenberg made his request the day before closing arguments are expected in the federal Court of Claims in Washington, D.C., in a separate lawsuit claiming the government shortchanged his Starr International insurance company, largest shareholder in AIG when it was bailed out in 2008.

In the state case against Greenberg, the Court of Appeals needs to decide whether the law allows Schneiderman to seek the penalties he wants, his lawyers argued.

Greenberg was released from claims by AIG, which paid the bonuses, they pointed out.

“Leaving these legal issues unresolved undermines New York’s status as a financial capital,” Greenberg’s lawyers said.

Greenberg’s co-defendant, former AIG chief financial officer Howard Smith, joined the motion to the Appellate Division, First Judicial Department in Manhattan. The state is also seeking Smith’s bonus money and to ban him from certain roles.

As an alternative, the executives requested an opportunity to re-argue the case to the mid-level appeals court.

Matt Mittenthal, a spokesman for Schneiderman, said the attorney general would oppose the latest effort to delay the trial.

He later added that Justice Charles Ramos of Manhattan state Supreme Court on Tuesday set June 25 as the trial date.

Greenberg and Smith are accused of trying to hide losses at AIG through fraudulent transactions, including with a reinsurance unit of Warren Buffett’s Berkshire Hathaway Inc.

Schneiderman has pursued the case despite dropping claims for as much as $6 billion in damages in the wake of a class action settlement.

He wants to recoup roughly $55 million of bonuses and interest covering the 2000-2005 period when the fraud allegedly took place.

The case is People v Greenberg, et al, New York State Supreme Court, New York County, No. 401720/2005.

(Reporting By Karen Freifeld.; Additional reporting by Jonathan Stempel in New York. Editing by Andre Grenon)

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