Maurice “Hank” Greenberg, who built AIG into an insurance-industry powerhouse only to be forced out under pressure from regulators, must stand trial for accounting fraud, New York’s highest court has ruled.
The New York Court of Appeals ruled that state officials can try to recover millions of dollars in bonuses and interest from Greenberg, 91, and his co-defendant, Howard Smith, 71, former AIG chief financial officer.
It can also bar the men from the securities industry and prevent them from serving as directors of publicly traded companies, the New York Court of Appeals ruled.
The decision is a victory for the New York attorney general’s office, which first filed the charges 11 years ago.
“Nobody — no matter how rich or powerful — is allowed to commit fraud in our state, and we are very pleased the people of New York will finally have a chance to obtain justice at trial,” state Attorney General Eric Schneiderman said in a statement.
“We look forward to demonstrating that Mr. Greenberg and his associates orchestrated two major frauds that caused massive losses to A.I.G.’s shareholders,” he added.
In 2005, then-Attorney General Eliot Spitzer accused Greenberg and Smith of using fraudulent transactions to hide the insurance company’s losses and mislead investors about its financial condition.
Greenberg’s lawyer, David Boies, later tried to get the charges dismissed, arguing that a $115 million settlement between AIG executives such as Greenberg and a group of shareholders should have ended the case.
But the court rejected that argument and ordered the trial to proceed.
A spokesman for Greenberg e-mailed a statement to NPR taking issue with the ruling:
“Mr. Greenberg respectfully disagrees with the court’s decision, which inexplicably fails to address at all the principal argument raised on appeal — that under the court’s own prior ruling in People v Applied Card the relief sought by the attorney general is barred by settlements already entered into by Mr. Greenberg with AIG and the SEC. Mr. Greenberg is considering his options in light of this decision, which he believes flies in the face of both the court’s own precedent and federal law.”
Greenberg led AIG for more than four decades, until he was forced out in 2005 amid questions about the company’s accounting.
He remained a major shareholder of AIG and continued to be a big critic of the company from the sidelines. When the company suffered big losses in the mortgage downturn and had to be rescued by the federal government, Greenberg attacked the terms of the bailout as onerous.