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Regulation and Compliance > State Regulation

Greenberg faces trial as court rejects bid to toss AIG suit

By Chris Dolmetsch, Christie Smythe

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(Bloomberg) — Former American International Group Inc. Chairman Maurice “Hank” Greenberg lost his bid to toss a decade-old fraud suit by New York’s attorney general, clearing the way for trial unless he appeals to the state’s highest court.

New York Attorney General Eric Schneiderman, who took over the case, claims Greenberg was responsible for sham transactions with General Reinsurance Corp. in 2000 and 2001 that inflated AIG’s loss reserves by $500 million.

A trial had been scheduled to start in February but was delayed as Greenberg sought to have the case thrown out. A New York state appeals court Thursday sent the case back for trial.

“We look forward to presenting the people’s case at trial,” Liz DeBold, a spokeswoman for Schneiderman, said in a statement. Steve Aiello, a spokesman for Greenberg, said he hasn’t made a decision yet whether to appeal.

Greenberg said New York’s pursuit of the case is a waste of taxpayer money and that the suit has “fallen apart” since it was filed by then-Attorney General Eliot Spitzer in 2005. His successors have been forced to abandon some claims, including damages, leaving only a case seeking “meaningless and duplicative relief,” Greenberg said in court filings.

Greenberg stepped down as AIG’s chief executive officer in March 2005, the same month the New York-based insurer said the transaction with Gen Re were improper.

Schneiderman is seeking disgorgement of cash bonuses received by Greenberg and wants to bar him from participating in the securities industry or serving as an officer or director of a public company.

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

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