Former American International Group Inc. (AIG) CEO Maurice "Hank" Greenberg found himself again trying to bat away one probing question after the next from the witness stand Thursday, facing a prosecutor's questions about how he dealt with a colleague's warning that AIG could face stepped up regulatory scrutiny after the 2001 Enron accounting scandal.
David Nachman, a senior enforcement lawyer for the New York Attorney General's Office, zeroed in on a May 2002 memo issued to Greenberg by Joseph Umansky, then an AIG senior vice president. In the memo, Umansky allegedly warned Greenberg that the company might need to rethink a financial transaction — known as CAPCO — that was aimed at converting auto-warranty insurance underwriting losses into capital losses considered less harmful by investors.
"The CAPCO structure needs to be revamped in order to put us farther from criticism in today's environment," Umansky wrote to Greenberg, according to Nachman, who read parts of the memo aloud in Manhattan Supreme Court.
Greenberg 'looked to professional advice'
Nachman, leaning forward at a lectern just a couple yards from Greenberg, asked the former AIG chairman what he did in response to Umansky's memo.
"I wanted to talk to the lawyers [at AIG] and find out what their views are" about whether to revamp the transaction's structure, replied Greenberg, 91. The answer echoed a refrain that has become common in the two-week-old civil fraud trial against Greenberg—he has repeatedly stated that he looked to professional advice from lawyers and accountants.
Nachman, who often begins a series of questions in a low-key manner before escalating the pitch and intensity of his voice, did not let up.
"Are you saying you recall consulting with counsel?" he asked.
"I'm not saying that," said Greenberg, who often uses a level, softer voice when responding to questions. "I likely would have wanted to do that."
Greenberg: 'I can't recall'
Nachman came back at him, "Do you recall taking any steps in response to this memo?"
"I can't recall."
"Why it was necessary to revamp this structure?" Nachman continued. "What criticism may AIG have come under?"
Again, Greenberg said, "I can't recall."
The exchange was emblematic of the standoff between Nachman and Greenberg, who spent his third straight day on the witness stand. It was also similar to the way their exchanges have unfolded this week.
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