| NEW YORK
NEW YORK May 28 New York's highest court will
hear arguments on Tuesday on whether to dismiss a lawsuit
accusing Hank Greenberg of orchestrating sham transactions when
he was head of insurance company American International Group
New York Attorney General Eric Schneiderman dropped damages
claims in the case last month, but he is still trying to have
Greenberg, 88, banned from the securities industry and from
being a director or officer of a public company.
David Boies, a prominent lawyer who represents Greenberg,
said he would argue at Tuesday's hearing for a dismissal of the
"The case is over," Boies told Reuters on Friday.
Schneiderman disagreed. "Three consecutive attorneys general
have pursued this case," said his spokesman, Damien Lavera.
"Justice demands personal accountability for people who commit
fraud, no matter how rich or well-connected they may be."
Eliot Spitzer, the New York attorney general at the time,
brought the lawsuit in 2005. Andrew Cuomo, Spitzer's successor
and now New York's governor, later oversaw the case.
It centers on two transactions in which AIG misled its
shareholders. One, with General Re Corp, a unit of Warren
Buffett's Berkshire Hathaway Inc, raised AIG's loss
reserves by $500 million without transferring risk. Another,
with Capco Reinsurance Co, hid a $210 million underwriting loss
in an auto-warranty program.
At Tuesday's hearing, New York's Court of Appeals will hear
Greenberg's effort to reverse lower court rulings that allowed
the case against him and former AIG Chief Financial Officer
Howard Smith to go forward.
The appeal originally included a much-anticipated challenge
to New York's Martin Act, the 1921 securities fraud statute that
attorneys general Spitzer, Cuomo and Schneiderman have wielded
against Wall Street since the early 2000s.
Boies was set to argue that the state attorney general lacks
authority to recover damages on behalf of private entities.
Those arguments became moot on April 25, when Schneiderman
dropped his damages claims against Greenberg and Smith.
"I'm disappointed, but I'm not going to complain," Boies
said on Friday. "I think the Martin Act issue is an important
Regarding the state's remaining claim, Boies said he would
tell the judges that the state could not seek injunctive relief
now because it did not push for it in the lower courts.
"They have now abandoned the only claim they made in the
trial court, which was a claim for damages," Boies said. "Their
attempt to keep the case alive by adding a new claim for
injunctive relief should fail."
He said he might also argue that the state had wrongly
relied on hearsay evidence to support the Gen Re claim.
"There is no admissible evidence ... of any knowledge or
participation by Mr. Greenberg or Mr. Smith in the activity that
is alleged to be improper," Boies said.
Solicitor General Barbara Underwood, who will present the
attorney general's case on Tuesday, is expected to argue that
the state is not making a new claim and that the trial should
In court papers, the state has said Greenberg "initiated,
negotiated and approved" the transaction with Gen Re "with
knowledge of its fraudulent terms." Smith helped implement the
deal and also knew of the sham, the state said.
A seven-member panel of the court will hear the arguments in
Albany. A decision could come in June.
Spitzer, who went on to become New York governor before
resigning in 2008, applauded Schneiderman's resolve in bringing
the case to trial. "Money is no longer what matters in this
litigation," he told Reuters. "What is critical is the
historical record be set out with accuracy."
Former New York governors George Pataki and Mario Cuomo,
Andrew Cuomo's father, said in a joint op-ed piece published in
the Wall Street Journal on May 12 that Schneiderman should drop
The transaction with General Re led to five convictions of
and two guilty pleas from former officials of the companies. A
federal appeals court overturned the convictions in 2011, citing
errors by the trial judge.
The five entered into deferred prosecution agreements. As
part of the deals, all five agreed that aspects of the
transaction were fraudulent and that they should have taken
steps to stop it. Buffett was not accused of wrongdoing.
Greenberg left New York-based AIG in March 2005 after nearly
four decades at the insurer's helm. After his ouster, AIG paid
$1.6 billion to settle regulators' claims of improper accounting
and other practices. AIG also restated financial results for
The case is People v. Maurice R. Greenberg, New York State
Supreme Court, New York County No. 401720/2005