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NY Attorney General Drops Effort to Recover Damages from Former AIG Chief Greenberg

Source: A.M. Best

Posted on 01 May 2013 by Neilson

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Hank GreenbergNew York Attorney General Eric Schneiderman will not seek to recover damages from former American International Group Chief Executive Officer Maurice "Hank" Greenberg in a lawsuit filed in 2005. But the state will continue its effort to have Greenberg barred from participating in the securities industry and from serving as an officer or director at a publicly traded company, according to a letter filed with the New York State Court of Appeals.

The case before the Court of Appeals centers upon Greenberg's challenge to the state's ability to recover damages for allegedly fraudulent transactions conducted while Greenberg served as AIG CEO and chairman.

Attorneys for Greenberg recently asked the New York Attorney General's office to say what effect a recent settlement in the underlying case would mean for the state's case against their client.

Earlier this month, a federal judge in New York signed off on a $115 million settlement in a 2005 lawsuit filed by American International Group Inc. shareholders against Greenberg and other former AIG executives.

U.S. District Judge Deborah Batts' April 10 ruling resolved claims filed by a group of AIG shareholders who have said in court papers that AIG misled investors by allegedly inflating stock prices, engaging in a bid-rigging scheme and disseminating false statements that ultimately led to a $3.4 billion restatement in 2005.

The settlement made it unclear whether the state would continue to seek damages from Greenberg or to try to have him barred from the securities industry. Greenberg currently serves as chairman and CEO of C.V. Starr and Starr International Co.

"Attorney General Schneiderman feels strongly that individuals in the financial services industry who perpetrate fraud, no matter how wealthy or powerful, must be held publicly accountable, and that is why we believe justice will best be served by proceeding to a long overdue trial of Mr. Greenberg as quickly as possible," Damien LaVera, a spokesman for the attorney general, said in a statement.

Efforts to reach Greenberg's attorney David Boies for comment were not immediately successful.

The allegations at issue in the case took place prior to AIG receiving $182 billion in government bailouts during the financial crisis of 2008 and 2009.

In 2006, AIG consented to a final judgment on U.S. Securities and Exchange Commission accounting fraud charges, without admitting or denying allegations that it falsified its financial statements from at least 2000 until 2005 through a variety of sham transactions and entities, and reported materially false and misleading information about its financial condition (Best's News Service, Feb. 10, 2006). Greenberg was forced out during investigations into AIG's accounting.

The proceeds of the latest settlement will go to shareholders who bought stock in AIG between Oct. 28, 1999, and April 1, 2005.