Hank Greenberg, former AIG chairman, must stand trial, court rules
June 8, 2016
As published in USA Today on June 2, 2016.
NEW YORK — A court ruled Thursday that former AIG chairman Maurice “Hank” Greenberg will have to stand trial for fraud, a major milestone for the New York State attorney general whose office has spent more than a decade pursuing those who ran the global insurance company.
New York State long has contended that Greenberg, American International Group’s one-time chairman and CEO, as well as other company officials, should be held accountable for fraudulent transactions during the period they ran the company. Greenberg has argued AIG already had fulfilled any financial obligation with a civil settlement it made with the Securities and Exchange Commission in 2009.
But New York State’s Court of Appeals ruled for the second time that the case can go forward.
“We again hold that the Attorney General’s claims against defendants withstand summary judgment and, therefore, should proceed to trial,’’ the ruling said.
New York State Attorney General Eric Schneiderman praised the decision.
“Since 2005, this office has sought to hold Mr. Greenberg and Mr. Smith responsible for financial fraud and manipulation during their tenure at A.I.G,’’ Schneiderman said in a statement, also referring to former AIG chief financial officer Howard Smith. “Today, New York’s highest court has allowed those claims to proceed to trial, where 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.”
Greenberg ran AIG for almost four decades until he resigned in 2005 amid probes into the insurer’s accounting practices. In 2006, AIG reached a $1.64 billion settlement with federal and state securities and insurance regulators.
In the current case, New York State will seek to go after bonuses Greenberg and other AIG officials accrued during the time they engaged in allegedly fraudulent transactions.
Greenberg, 91, currently is chairman and CEO of C.V. Starr, a New York-based insurer. In a statement, Greenberg said he “respectfully disagrees with the court’s decision,” adding he is considering his options because he believes the decision “flies in the face of both the court’s own precedent and federal law.”
Smith, 70, is vice chairman at C.V. Starr. His attorney, Vincent Sama of Kaye Scholer, released a statement saying, in part, “Mr. Smith is extremely disappointed by and disagrees with today’s decision by the New York State Court of Appeals.”