A lawyer for the New York Attorney General’s Office peppered Maurice “Hank” Greenberg with hours of questions on Tuesday, attempting to show he had played an intense, “hands on” role in trying to control losses from a failing auto-warranty insurance segment at American International Group, Inc.
In the first day of Greenberg’s direct testimony in the long-awaited civil fraud trial against him, David Nachman, a senior enforcement lawyer for the state, worked to paint Greenberg as a heavily involved CEO and chairman who considered the millions of dollars in losses hemorrhaging from AIG’s auto-warranty line to be a “debacle.”
“You thought the business was a debacle?” Nachman asked Greenberg at one point, his voice rising.
Speaking softly, Greenberg answered, “The way it was being conducted.”
The daylong questions were an attempt to lay the groundwork for one of Attorney General Eric Schneiderman’s two central allegations against Greenberg: That he orchestrated a sham financial transaction in 2000 that wrongfully converted underwriting losses from the auto-warranty segment into capital losses, to give investors a false picture of AIG’s financial health.
Greenberg, now 91, took a pair of silver-rimmed glass from his dark suit jacket and dug into document after document placed before him by Nachman, reading the court exhibits carefully and then verbally jousting with Nachman over his actions, his true intentions in 1999 and 2000, and just how concerned he really was about the auto-warranty segment of the giant insurance company.
“I think what you’re not covering here,” he told Nachman from the stand at one point, “is that this [auto-warranty line] was only a small part of our business. Our business was huge. … This was insignificant.”
Stressing repeatedly that AIG, which under Greenberg’s direction grew to become the world’s largest insurance company, operating in 137 countries, Greenberg also said that a major reason why he kept up his interest in the auto-warranty segment was to teach his subordinates a lesson about not entering into a bad business in the future.
“I wanted to teach people a lesson,” he said. “I thought their judgment going into that [auto-warranty program] was bad.”
But Nachman gave no quarter. Throughout the day, he read from and entered into evidence memo after memo sent directly from senior deputies throughout 1999 and 2000 to Greenberg.
The memos and reports sought to detail the progress they were making in trying to contain the auto-warranty losses, which an actuary had told Greenberg and senior AIG management would run into hundreds of millions of dollars.
Reading from the correspondence of one senior deputy, Nachman had Greenberg confirm that he had called the deputy on weekends about the problem. Early in the day, Nachman pointed out that Greenberg’s son, Evan, who was a chief operating officer at AIG, had supported the idea of the auto-warranty business.