Ex-AIG CEO Greenberg denies having admitted to fraud as claimed by NY attorney general
Former AIG boss Maurice “Hank” Greenberg has reiterated and reaffirmed publicly that he did absolutely nothing wrong while at the helm of the company.
Greenberg, along with former chief financial officer Howard Smith, have agreed to settle a 12-year old $9 million securities fraud case.
The lawsuit, People v Maurice R Greenberg and Howard I Smith, was first brought by the then New York 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, according to a statement by the office of current attorney general (AG) Eric Schneiderman.
The transactions in question, one with Berkshire Hathaway unit GenRe and one with Capco, had materially misrepresented AIG’s loss reserves and misstated its underwriting results, respectively, during the period 2000 to 2004, according to the attorney general’s statement.
The statement said: “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.”
However, at a press conference on Feb. 13, Greenberg’s lawyer said that the press release was “very misleading.” It talked about fraud “although there hadn’t even been mention about fraud in the agreed settlement statement.
"The NY AG, after settling its 12-year case against Hank Greenberg without the admission of any fraud, issued a misleading press release claiming otherwise in a transparent attempt to claim a victory for destroying AIG and Mr Greenberg’s good name, according to a Feb. 13 issued statement.
“The AG and we agreed a joint state of facts that our mediator approved that there was no fraud involved and made clear that Mr Greenberg did not have the knowledge of any inaccuracies in the account.”
Greenberg said that AIG found out in 2005 that a $500 million portfolio that Gen Re had ceded to AIG had been also ceded to another company. The deal was a one-time finite risk reinsurance deal AIG entered into with Berkshire Hathaway structured by Berkshire’s General Re Dublin unit in 2000- 2001.
“You can’t reinsure the same thing twice,” he said. “Had we known that [this was the case] it wouldn’t have happened.”
Greenberg said that there is not much he can do about how the office of attorney general described the settlement.
“The attorney general has immunity in his position. We can’t bring any action against him.” Greenberg has said that the attorney general owes him an apology.
Greenberg believes that the case against him was politically motivated from the start.
The case was initiated by then NY AG Eliot Spitzer, who launched a barrage of investigations in the early 2000s against NY’s financial industry in order to burnish his reputation as the self-proclaimed “Sheriff of Wall Street” as a prelude to his run for Governor, according to the statement from Greenberg.
It also claims that in 2005, in reaction to AIG CEO Hank Greenberg’s criticism of the abuse of prosecutorial powers by Spitzer and others, Spitzer launched an investigation of AIG, claiming improper accounting and using the Martin Act. The Martin Act gives the state sweeping powers to prosecute businesses and individuals without having to prove fraudulent intent. It is not consistent with federal law, and its use by Spitzer and his successors has been applied selectively for political purposes, according to the statement.
According to the statement from the Greenberg camp, despite the claims of powerful evidence, the NY AG ultimately failed to uncover anything, nor could he produce a single credible witness to corroborate his claims of any wrong-doing by Greenberg. Originally seeking six billion dollars in damages, by the time the case went to trial, those damages were dropped.
In accepting mediator's recommendations, Greenberg has stressed publicly that he did absolutely nothing wrong while at AIG and that the only two (of nine) transactions which remained in the NY AG's case – the Gen Re transaction and the Capco transaction – had no effect on AIG's net income or consolidated shareholders' equity.
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