New York state prosecutors have “a devastating case” against Maurice “Hank” Greenberg, the former American International Group Inc. chief executive accused of fraud over a reinsurance transaction 10 years ago, the presiding judge said in court Tuesday.
After four hours of oral arguments, New York State Supreme Court Justice Charles Ramos reserved ruling on Greenberg’s motion to dismiss the case or the office of New York Attorney General Andrew Cuomo’s request for summary judgment. The judge did not indicate when he would rule.
Greenberg’s attorney David Boies argued that much of the attorney general’s case relies on hearsay disputed evidence regarding two conversations Greenberg had with onetime General Re Corp. Chief Executive Ronald Ferguson that purportedly sealed the deal.
The judge told Boies that David Ellenhorn, a lawyer in the attorney general’s office, “has put together a devastating case, a very strong case, and we both know it. I am very, very much focused on those two conversations Mr. Greenberg had with Mr. Ferguson.”
Brought in 2005 by former Attorney General Eliot Spitzer, the case involves a 2000 reinsurance transaction with General Re, a unit of Warren Buffett’s Berkshire Hathaway Inc, that boosted AIG’s loss reserves by $500 million without transferring risk.
Federal prosecutors have obtained five criminal convictions and two guilty pleas of former General Re and AIG officials over the transaction, including a conviction of Ferguson. He was sentenced to two years in prison.
Robert Morvillo, another Greenberg attorney, told the judge that there was “no independent, non-hearsay evidence that Mr. Greenberg became part of a conspiracy.”
He argued that out of 50 depositions in evidence, only the testimony of convicted former GenRe executive Richard Napier said there was an oral side agreement on the transaction. Napier pleaded guilty to a conspiracy charge and was sentenced to probation.
The transaction at issue long preceded taxpayer bailouts of about $180 billion for AIG after it nearly collapsed from mortgage-related losses. The revelation of the GenRe case contributed to Greenberg’s ouster in 2005.
“This transaction is material because it was designed to, and did in fact, mislead investors about AIG’s reserves,” Ellenhorn told the court.
He said that when he deposed Greenberg two weeks ago, 90 percent of his answers were “I don’t know,” despite the now 84-year-old’s fame for knowledge of the insurance business and attention to detail.
“He drills down so deep, to the Arctic ice, and yet he tells us he doesn’t know the details of what he discussed with Ferguson,” Ellenhorn said. “It’s ridiculous.”
Greenberg is trying to rehabilitate his reputation by settling lawsuits over the transaction and his departure from AIG.
Former AIG Chief Financial Officer Howard Smith also was charged in the civil lawsuit, which seeks to hold the two former executives of what was once the world’s largest insurer liable under the Martin Act, New York’s powerful securities law.
Last August, Greenberg agreed to pay $15 million to settle U.S. Securities and Exchange Commission charges that he altered AIG’s records to boost results between 2000 and 2005.
Three months later, Greenberg and AIG resolved years of litigation that followed his exit. AIG agreed to reimburse him and others for as much as $150 million of legal expenses.
Investigators have questioned Buffett about the General Re transaction, but the billionaire has not been accused of any wrongdoing in respect to the transaction in question.
The case is New York v. Greenberg et al, New York State Supreme Court, New York County, No. 401720/2005.
(Reporting by Grant McCool, editing by Gerald E. McCormick)
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