Former AIG CEO Hank Greenberg loses bid to dismiss NY case

Tue Jun 25, 2013 2:01pm EDT
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By Karen Freifeld

(Reuters) - Former American International Group AIG.N Chief Executive Maurice "Hank" Greenberg failed to persuade New York state's highest court to dismiss a lawsuit seeking to hold him accountable for sham transactions at the insurer.

The decision by the state's Court of Appeals is a victory for New York Attorney General Eric Schneiderman, who has been pursuing a case first brought in 2005.

Greenberg, 88, has argued that there was no admissible evidence that he orchestrated a $500 million transaction with reinsurer General Re Corp that misled AIG shareholders, and that the case should have ended in April when the state dropped a claim for as much as $6 billion in damages.

But in a 7-0 decision on Tuesday, the Court of Appeals said there was easily enough evidence that Greenberg and co-defendant Howard Smith, AIG's former chief financial officer, knew the AIG-Gen Re transaction was fraudulent for the case to go forward.

"We have no difficulty in concluding that ... there is evidence sufficient for trial that both Greenberg and Smith participated in a fraud," Judge Robert Smith wrote for the state's top court.

The ruling also said that the attorney general could seek to ban Greenberg and Smith, 68, from participating in the securities industry and from serving as officers and directors of public companies.

Greenberg led AIG for nearly four decades before he was ousted in 2005. The following year, AIG paid $1.64 billion to settle federal and state probes into its business practices.

The Greenberg case was brought by former state Attorney General Eliot Spitzer, and was later pursued by his successors Andrew Cuomo, now New York's governor, and Schneiderman.   Continued...

Former CEO of American International Group Inc, Maurice "Hank" Greenberg, checks his phone inside a car after leaving a building in downtown New York where he was deposed by the Attorney General's office March 10, 2010. REUTERS/Jessica Rinaldi