Former AIG chief Greenberg must face New York fraud trial

Thu Jun 2, 2016 5:04pm EDT
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By Karen Freifeld

NEW YORK (Reuters) - Former American International Group CEO Maurice "Hank" Greenberg must stand trial for allegedly orchestrating sham transactions at the insurer, New York's top court ruled on Thursday, as the long-time financial industry titan failed in his 11-year-old quest to escape civil fraud charges.

The New York Court of Appeals also ruled that the state could seek to recoup from Greenberg, 91, and co-defendant Howard Smith, 71, AIG's former chief financial officer, tens of millions of dollars in bonuses and interest covering the 2000-2005 period when the alleged fraud occurred. More than $55 million may be at stake.

In addition, the court said the state could seek to ban Greenberg and Smith from the securities industry and from serving as officers or directors of public companies.

Greenberg said he was considering his options in light of the ruling, which he said "flies in the face of the court's precedent and federal law." His options appear to be going to trial, asking the state court for reconsideration or asking the U.S. Supreme Court to review the matter.

Vincent Sama, a lawyer for Smith, said his client was disappointed with the decision and will continue to "vigorously defend himself."

Greenberg led AIG (AIG.N: Quote) for 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 New York-based insurance giant was rescued by the U.S. government in September 2008 to stave off bankruptcy after the company ran up billions of dollars in losses stemming from insurance it wrote on shoddy mortgage securities.

New York Attorney General Eric Schneiderman said he looks forward to demonstrating that Greenberg and associates orchestrated two major frauds that caused massive losses to AIG shareholders.   Continued...

Former American International Group (AIG) CEO Maurice Greenberg testifies before a House Oversight and Government Reform hearing on "The Collapse and Federal Rescue of A.I.G. and What It Means for the U.S. Economy" on Capitol Hill in Washington April 2, 2009. REUTERS/Kevin Lamarque