U.S. May Call Greenberg to Testify in AIG Lawsuit

That is likely to change soon, as the former AIG chief is on the list of potential witnesses as the government sets out its rebuttal arguments. In a trial that has lacked fireworks, the testimony could be a lively event, with the feisty 89-year-old squaring off against government lawyers who may seek to use Mr. Greenberg's own words against him.

Known as a sometimes brusque, hard-charging boss, Mr. Greenberg built AIG into a global insurance behemoth over nearly four decades before being pushed out in 2005, and he was its largest individual shareholder when the bailout occurred. The lawsuit, filed by his investment and charitable firm Starr International Co., accuses the government of overstepping its authority in demanding a 79.9% equity stake in exchange for providing an $85 billion emergency loan.

Since the trial began Sept. 29, Mr. Greenberg hasn't set foot in the U.S. Court of Federal Claims in Washington, due to rules that don't allow potential fact witnesses to sit in on other testimony. Reached on his cellphone last week, Mr. Greenberg said, "I'm in China. I just finished working out." He said he was headed to meetings for an auto insurer in Shanghai that is majority-owned by a new insurance conglomerate he is building, New York-based Starr Cos.

He said he aimed to fly back to the U.S. on Sunday from his two-week trip overseas, but declined to comment on whether he was looking forward to taking the stand. "I can't talk very much about the trial while it is going on," he said. "It's inappropriate."

Mr. Greenberg departed AIG after then-New York Attorney General Eliot Spitzer accused the company of accounting improprieties to burnish results, and he has been outspoken in his criticism of AIG's board for not supporting him in his fight against the alleged wrongdoing. He continues to resist the remaining allegations lodged against him personally.

It isn't certain that Mr. Greenberg will be called to testify in the Starr lawsuit; Representatives for the attorneys in the case didn't comment.

But in cross-examining an expert witness called last week by Mr. Greenberg's lawyer, David Boies, the government used the former AIG boss's previous statements to seek to demonstrate that the company wasn't an innocent victim of larger forces.

In the testimony last week, finance expert Michael Cragg of consultancy Brattle Group sought to bolster the lawsuit's contention that AIG's liquidity crisis was caused by the same market gyrations that hit other financial institutions in 2008, but banks got relatively generous loan terms while AIG became a political scapegoat.

In challenging Mr. Cragg, Justice Department lawyer Kenneth Dintzer cited documents showing Mr. Greenberg himself previously has faulted AIG's management.

One was a letter Mr. Greenberg wrote in May 2008 to AIG's board, four months before the bailout. AIG's problems extend "far beyond its subprime credit exposure or approach to capital management," Mr. Greenberg wrote, said Mr. Dintzer in reading the letter into the record. "Core businesses are also deteriorating," Mr. Greenberg wrote, continuing: "AIG is in crisis."

Mr. Dintzer also quoted from a lawsuit that Mr. Greenberg had filed against AIG in 2009 in federal court in Manhattan alleging fraud related to "material misrepresentations and omissions" concerning multibillion-dollar losses on its bond-insurance business. According to the lawsuit, Mr. Greenberg's successors "refused to take any blame for the crisis they brought upon AIG." (The parties voluntarily dismissed the lawsuit in 2010.)

The use of previous public statements against star witnesses is something of a theme at the trial. Earlier, Mr. Boies extensively mined the financial-crisis memoirs of former Treasury secretaries Henry Paulson and Timothy Geithner, pulling out passages to argue that they set out to punish AIG.

The government maintains the tough AIG-bailout terms were aimed at mitigating future moral hazard and compensating taxpayers for the risk the government was taking.

In a pretrial court filing, the government notes briefly that it intends to ask Mr. Greenberg about AIG's financial condition, as well as matters such as his efforts to secure private investments for AIG starting in 2008.

Mr. Greenberg asserts the government impeded AIG's efforts to obtain private-sector help as the crisis reached its peak and coerced it into accepting the bailout. He argues the government then used its control of AIG to funnel money to the company's Wall Street and overseas bank counterparties, fully repaying them in a "backdoor bailout" rather than negotiating concessions. The government maintains AIG's board voluntarily adopted the bailout package to avoid a bankruptcy filing.