The former chief executive officer of AIG, Maurice (Hank) Greenberg, is set to go on trial May 2 in a lawsuit by New York state alleging he used sham transactions to hide the insurer’s financial condition.
New York state Supreme Court Justice Charles Ramos in Manhattan set the trial date today. Robert Morvillo, an attorney for Greenberg, and VincentSama, who represents his co- defendant, former AIG Chief Financial Officer Howard Smith, said they will ask a state appeals court to delay the trial until appeals in the case, which was filed in 2005, are decided.
“Delay is a four-letter word,” Ramos said. “It is not going to be delayed anymore.”
David Ellenhorn, a lawyer representing the New York attorney general’s office, told Ramos the trial should take place in a few months. The office, which brought the state case, will oppose a tentative settlement in a federal class-action securities lawsuit raising some of the same issues, he said. The state case should be tried before a federal judge decides whether to approve the settlement, Ellenhorn said.
Under the settlement, Greenberg, Smith, other former AIG executives, C.V. Starr & Co. and Starr International Co. would pay $115 million to resolve shareholder lawsuits, according to court papers. The suits stemmed from an alleged accounting fraud that led AIG to restate earnings, among other claims.
“We think that settlement is, to say the least, a sweetheart settlement against public policy and we’re going to oppose it,” Ellenhorn told Ramos. “The stockholders of AIG who have a right to come to the court and object to the settlement ought to know the results of this case.”
Ellenhorn said the attorney general’s office believes the state case will result in a “multibillion-dollar judgment” against Greenberg. The former CEO’s lawyers want the proposed federal settlement approved before his liability is adjudicated, Ellenhorn said.
Approval of a settlement in the federal case would render the state action moot, Morvillo and Sama said. Sama said he expects the accord to be approved, leaving the New York attorney general with no standing to seek damages.
If a federal settlement would have a binding effect on the state case, the issue should have been litigated years ago, Ramos said.