Reinsurance Suit Against Greenberg Sent to New York’s Top Court Again

By and | June 19, 2015

A decade-old lawsuit in which New York accused former American International Group Inc. Chief Executive Maurice “Hank” Greenberg of accounting fraud will head to the state’s highest court for a second time, likely delaying for several months a trial that had been set for June 25.

The appellate division, a mid-level New York state court, on Thursday granted Greenberg’s request to appeal its April 16 ruling that New York Attorney General Eric Schneiderman could pursue his bid to ban Greenberg from the securities industry, impose an officer and director ban, and recoup bonuses.

Greenberg, 90, was sued in 2005 by then-New York Attorney General Eliot Spitzer for arranging fraudulent transactions at AIG that boosted the insurer’s loss reserves by $500 million.

Schneiderman later inherited the lawsuit, but was forced to drop damages claims as high as $6 billion.

Greenberg has called the remaining case a waste of taxpayer money, after he and other defendants reached a $115 million settlement with shareholders that won court approval in 2013.

Schneiderman has said his lawsuit is needed to help ensure that executives who commit fraud are held publicly accountable.

The April 16 ruling was 5-0. Greenberg and co-defendant Howard Smith, a former AIG chief financial officer, did not have an automatic right to appeal.

Matt Mittenthal, a spokesman for Schneiderman, declined to comment. A lawyer for Greenberg also declined to comment.

The case is separate from an appeal by Greenberg’s Starr International Co. to a judge’s ruling on Monday over the federal government’s 2008 bailout of AIG. In that case, the judge said the Federal Reserve overstepped its authority in imposing tough bailout terms, but awarded Starr no money because AIG would otherwise have gone bankrupt. Starr on Thursday filed a formal notice of appeal of that decision over the lack of damages.

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

(Reporting by Karen Freifeld and Jonathan Stempel in New York; Editing by Andrew Hay)

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