New York AG Settlement with ex-AIG Chief Greenberg Breaks Down

Efforts to settle a long-running fraud lawsuit against American International Group Inc.’s former chief, Maurice “Hank” Greenberg, have broken down amid the insurer’s financial woes, a lawyer from the New York attorney general’s office said Monday.

Before AIG’s near collapse in mid-September, which led to a federal bailout, the parties had “reached a settlement,” David Ellenhorn, an attorney from New York Attorney General Andrew Cuomo’s office, said at a court hearing.

But then, “AIG went from $20-$30 (per share) to $2-$1 (per share), and unfortunately the deal didn’t happen,” Ellenhorn said.

Ellenhorn spoke at a status conference on the civil lawsuit before New York Supreme Court Justice Charles Ramos, who gave lawyers for the state and for Greenberg until April 30, 2009 to complete depositions of witnesses.

“We are getting all the depositions and documents we are entitled to in order to defend the case,” Greenberg’s attorney, Nicholas Gravante, said after the court conference.

The lawsuit was brought by former New York Attorney General Eliot Spitzer as part of an accounting probe of AIG that led to Greenberg leaving the company in 2005. AIG reached a $1.64 billion settlement with authorities in 2006.

Much of Greenberg’s wealth is tied up in AIG stock through personal holdings, a family trust and companies he controls.

The U.S. government now owns nearly 80 percent of AIG as the result of its $85 billion rescue of the insurance holding company in September. This month, AIG and the government announced a revised plan that boosted the amount of aid to as much as $150 billion.

Greenberg, now chairman and CEO of C.V. Starr & Co Inc., has publicly criticized the AIG management and board of directors that followed him for the insurance giant’s problems.

(Reporting by Grant McCool; editing by Jeffrey Benkoe)