10-Year Lawsuit Against Former AIG Executives Plods On (and On)

The lawsuit has been repeatedly delayed by what the presiding judge, Charles E. Ramos, exasperatedly described last year as "a series of seemingly never-ending motions and appeals."

The case is an illustration of how a defendant with deep pockets and a powerful legal team, in this instance led by David Boies, can endlessly manipulate not only state attorneys but the very court system itself, say some legal analysts.

The case has seen "World War I trench warfare, fighting over every yard," said Peter J. Henning, a criminal-law professor at Wayne State University in Detroit, who writes an online column for The New York Times's DealBook. He estimated that the defense could eventually cost more than $25 million.

One reason for the protracted proceedings is the New York court system's unusual practice of allowing so-called interlocutory appeals of decisions made by the presiding judge before a trial even begins.

In this case, the team led by Mr. Boies has appealed five decisions by Justice Ramos and two by an intermediate-level appeals court. The most recent appeal postponed a trial that had been scheduled to start June 25.

"Does it slow things down? Yes," said Oscar G. Chase, a law professor at New York University who has taught courses about New York practice. "It allows a deep-pocketed defendant to string out the case to their advantage. If a litigant's goal is to delay the case, a series of appeals is an effective way to do it." In an interview, Mr. Boies defended the numerous appeals, saying that some were needed to gain access to witnesses or documents withheld by the state. "While I think it's true that our appeals have inevitably delayed things, we have appealed because we thought we were right," he said.

Beyond the appeals, the defense sought testimony from 48 witnesses, compared with eight by the state. And while the state asked for October arguments on the current appeal, the defense pushed for February 2016. David Nachman, one of the state prosecutors, said the defense's actions over 10 years had made the case "as time-consuming and protracted as possible."

Mr. Boies also denied that Mr. Greenberg, who is known as Hank, was stalling on a case in which the presiding judge has repeatedly ruled in favor of the state.

"Hank wants a trial," Mr. Boies said. Mr. Greenberg has always fought for what he believes, he said, and "has never been afraid of the courtroom."

Mr. Spitzer filed the accounting fraud suit in a flurry of cases he brought against Wall Street, accusing analysts of fraudulent research, mutual fund operators of trading practices that shortchanged average investors and insurance brokers of bid-rigging and kickbacks.

In a nutshell, it accused Mr. Greenberg and A.I.G.'s former chief financial officer, Howard Smith, of engineering bogus transactions in 2000 and 2001 to bolster the company's reserves and convert losses on insurance underwriting into losses on investments - all to make A.I.G.'s numbers look better to Wall Street.

Mr. Greenberg, who was ousted as chief executive in 2005 facing regulatory and internal investigations into the company's accounting, has denied wrongdoing, saying he intended for the transactions to comply with accounting rules. Falsified documents that disguised some transactions were not his idea, he said, despite his reputation as a micromanager.

The transactions came to light when scrutiny of questionable accounting had intensified after sweeping frauds emerged at Enron and WorldCom. They were highlighted when A.I.G. itself settled accounting fraud charges brought by the Securities and Exchange Commission in 2006. Mr. Greenberg and Mr. Smith paid a total of $16.5 million to settle S.E.C. failure-to-supervise charges for the same transactions.

Along the way, the state dropped several accusations in its original complaint, and in 2013 it shifted the remedy it sought from restitution and damages to forfeiture of past pay and a ban on the defendants' working in the securities industry or as officers of any public company.

The remedy shift took place soon after Mr. Greenberg and Mr. Smith participated in a $115 million settlement of a class-action suit over the accounting brought by former A.I.G. shareholders, which threatened to pre-empt the state's demand for restitution. But it became a crucial element in the latest defense appeal, which argues in part that without a valid remedy the state has no case.

Mr. Boies, who also represented IBM in the antitrust case, said this has been the second longest out of some 85 significant court cases he has litigated.

"The IBM case went on for even longer, but there you were talking about the future of the entire computer industry," he said. Describing other long-running cases, he said his wife, Mary, had been involved in a 15-year price-fixing case involving the sale of drugs to retail pharmacies.

In the Greenberg accounting case, the first two defense appeals concerned two rulings by Justice Ramos, in 2006 and 2008, that narrowed or blocked access to A.I.G. legal documents. The defense won the first appeal but lost the second. In a statement, a spokeswoman for Mr. Boies said these disputes delayed the case for two and a half years.

The third defense appeal successfully nullified a 2010 order by Justice Ramos that granted summary judgment for the state on one of the transactions but failed to gain the summary judgment it sought to dismiss all claims. The fourth, in 2012, unsuccessfully sought a summary judgment by a higher appeals court.

The fifth defense appeal, in 2013, unsuccessfully sought the removal of Justice Ramos for what it called bias against Mr. Greenberg. The sixth, filed in June 2014, unsuccessfully appealed a ruling by Justice Ramos for what it called bias against Mr. Greenberg. The sixth, filed in June 2014, unsuccessfully appealed a ruling by Justice Ramos that denied summary judgment for the defense after the state shifted remedies. The seventh, filed in April, sought a higher appeals court review of the same question.

This seventh appeal, by the Boies, Schiller & Flexner partner Nicholas Gravante, prompted the latest trial delay. Earlier, the trial had been scheduled to begin on Jan. 19 and then Feb. 25 of this year. A decision on the latest appeal isn't expected until next year.

"I often find myself explaining to non-New York lawyers and clients, who don't understand the delays that you find in the New York state court system, that it is so easy to gum things up with interlocutory appeals," said Michael Gordon, a lawyer at Manatt, Phelps & Phillips.

One former state regulator noted that any strategy of delay might echo A.I.G.'s business strategy when Mr. Greenberg was at the helm: The company had a reputation for fighting claims and being slower to pay than some other insurers. (A.I.G. declined to comment on that perception.)

Still, some legal experts argue that Mr. Greenberg doesn't deserve all the blame for the case's slow pace, noting that Mr. Spitzer's successors as New York's attorney general, Andrew M. Cuomo and Eric T. Schneiderman, who currently holds the post, have not pulled out all the stops to speed things along.

"Different administrations may have differing commitments to any given case," said James Park, a professor of corporate law at the University of California, Los Angeles, and a former assistant attorney general in the Spitzer era.

A spokesman for the state's Office of Court Administration, David Bookstaver, acknowledged that the pretrial appeals procedures could favor wealthy litigants bent on delay, but he defended the rules as fair for both sides.

In an interview, Mr. Boies defended the numerous appeals, saying that some were needed to gain access to witnesses or documents withheld by the state. "While I think it's true that our appeals have inevitably delayed things, we have appealed because we thought we were right," he said.

Beyond the appeals, the defense sought testimony from 48 witnesses, compared with eight by the state. And while the state asked for October arguments on the current appeal, the defense pushed for February 2016. David Nachman, one of the state prosecutors, said the defense's actions over 10 years had made the case "as time-consuming and protracted as possible."