13 February 2017Insurance

Former AIG CEO Greenberg settles $9m securities fraud case

Former AIG boss Maurice “Hank” Greenberg, along with former chief financial officer Howard Smith, have agreed to settle a 12-year old $9 million securities fraud case.

In two separate statements, Greenberg and Smith had admitted to initiating, participating and approving two fraudulent transactions committed by AIG while acting as CEO and CFO, respectively.

Both Greenberg and Smith have agreed to return multi-million dollar bonuses they received while the frauds were on AIG’s books.

The lawsuit, People v Maurice R Greenberg and Howard I Smith, was first brought by attorney general Eliot Spitzer in 2005, following admissions by AIG that it had engaged in certain improper reinsurance transactions while Greenberg was CEO and Smith was CFO.

Two of the “sham deals” – the GenRe and Capco transactions, had materially misrepresented AIG’s loss reserves and misstated its underwriting results, respectively, during the period 2000 to 2004.

The office of attorney general Eric Schneiderman, who announced the settlement of the fraud suit, said: “Today's agreement settles the indisputable fact that Mr. Greenberg has denied for twelve years: that Mr. Greenberg orchestrated two transactions that fundamentally misrepresented AIG's finances.

“After over a decade of delays, deflections, and denials by Mr. Greenberg, we are pleased that Mr. Greenberg has finally admitted to his role in these fraudulent transactions and will personally pay $9 million to the State of New York.”

In the last 12 years, Greenberg and Smith have both refused to admit that the GenRe and Capco transactions were improper, or that they were responsible for the transactions.

In 2006, AIG was an original defendant in the attorney general’s suit, and had reached a prompt settlement to pay $1.6 billion to settle the matter.

After Schneiderman took the case against Greenberg and Smith to trial in September 2016, the two defendants have now acknowledged their involvement in these transactions.

Today’s top stories

A $4.3bn business sale to Blackstone fuels Aon’s M&A appetite

Cigna may seek alternative M&A target after failed $48bn Anthem deal

Sompo Canopius Re hires former Swiss Re and Munich Re exec

Neon appoints Validus exec as head of property reinsurance

Did you enjoy reading this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk

More on this story

16 June 2015   Maurice (Hank) Greenberg, the former chief executive officer (CEO) of American International Group (AIG), has secured victory in court against the US Government.
14 February 2017   Former AIG boss Maurice “Hank” Greenberg has reiterated and reaffirmed publicly that he did absolutely nothing wrong while at the helm of the company.
3 March 2017   Brown & Brown, a provider of re/insurance products, has settled its lawsuit against a number of its former employees, their current employer AssuredPartners and several key executives within the rival firm.