(Bloomberg) — Even at 91, former American International Group Inc. Chairman Maurice “Hank” Greenberg isn’t ready to quit fighting.
Greenberg scrapped with regulators and the Internal Revenue Service and beat the federal government in what some called a no-chance suit. Now, he’s set to march into state court in Manhattan to defend an 11-year-old lawsuit accusing him of using sham transactions at AIG to hide the company’s financial troubles from shareholders. Opening statements are scheduled for Tuesday.
The World War II veteran has stubbornly refused to settle, seeing the trial as an opportunity to redeem himself, more than a decade after he was pressured to resign from the company that he built, over almost 40 years, into the world’s biggest insurer.
“He needs the vindication of this trial now,” Peter J. Henning, a law professor at Wayne State University in Detroit who has followed the case, said in an interview. “He doesn’t need the aggravation but I think he is looking for some measure of vindication, that he should have been left in charge of AIG.”
Greenberg saw his reputation challenged as AIG settled regulatory probes following his departure in 2005, and then again as the company almost collapsed in the 2008 financial crisis from losses on derivatives.
The insurer was wrong to resolve the legal cases and risk management at AIG faltered under his successors, Greenberg has said. He and other AIG executives had agreed in 2009 to pay $115 million to settle shareholder lawsuits and $15 million to resolve a U.S. Securities and Exchange Commission suit. There were no admissions of wrongdoing in the settlements.
Those settlements should have ended the New York lawsuit over two re-insurance transactions, Greenberg said. They didn’t, although the state abandoned some of the claims in the May 2005 lawsuit filed by then-Attorney General Eliot Spitzer.
The state is no longer seeking damages to compensate shareholders. It now wants to bar Greenberg and former AIG Chief Financial Officer Howard Smith from serving as officers or directors of public companies and force them to give up more than $55 million that they received in bonuses.
Edward Evans, a spokesman for Boies Schiller & Flexner LLP, which represents Greenberg, declined to comment on the case. In a pre-trial memo, Greenberg and Smith said the attorney general can’t prove that either transaction was improperly accounted for, that the defendants knew of any alleged impropriety or that the two deals were material to AIG.
“The court should ask itself why this case is being tried at all,” they said in the memo. “The regrettable answer is that NYAG has lost all perspective of its role as New York state’s chief legal officer. It has so become blinded in the pursuit of a perceived trophy that it is prepared to rely on testimony that it knows to be false in an effort to obtain relief that it knows to be meaningless.”
The lawsuit has survived three state attorneys general, numerous appeals and unsuccessful attempts to remove the judge for alleged bias. The case will be decided by the judge, not a jury.