Government lawyers, probing whether the ex-boss of American International Group and the former head of the New York Stock Exchange used threats against floor traders to manipulate AIG share prices in 2004, ran into a Fifth Amendment wall last year.

Richard A. Grasso, former NYSE chief executive, invoked his Fifth Amendment right against self-incrimination more than 160 times when asked about actions by himself and AIG Chairman and CEO Maurice Greenberg, according to the record of the proceedings released yesterday.

The questions by Securities and Exchange Commission attorneys came as part of a probe into oversight of exchange specialists–who manage floor trading of stocks–that the agency accuses of profiting by trading ahead of customer orders.

Mr. Grasso later, in a deposition proceeding this April in a case brought by New York Attorney General Eliot Spitzer, was asked about the questions that he would not answer for the SEC. At that point he issued specific denials that any impropriety was involved in any of the activities questioned by the SEC.

According to the transcript, the government lawyers focused in large part on the dealings of Mr. Grasso and Mr. Greenberg with Spear Leeds and Kellogg, the floor specialists in AIG stock.

Mr. Grasso was asked if he had not paid personal visits on the floor of the exchange to Speer traders to tell them of Mr. Greenberg's unhappiness with their failure to prop up AIG's share price.

He was also questioned whether he had “yelled at” a Spear trader “for not living up to Mr. Greenberg's expectations,” and threatened to remove Spear as AIG specialist.

The SEC attorneys in their questioning noted that earlier, in February 2004, when Mr. Grasso gave testimony, he said he arranged four-to-eight meetings between AIG and Spear, prompted by Mr. Greenberg's “unhappiness.” They also noted prior testimony that Mr. Greenberg had threatened to take AIG off the exchange.

Mr. Grasso was quizzed about Spear's buying $17 million of AIG stock that was put in a special account in 2000.

“Isn't it true that you knew Spear established this investment account in an attempt to appease Mr. Greenberg?” Mr. Grasso was asked. Mr. Grasso–as he did with all questions concerning AIG and Mr. Greenberg–invoked the Fifth Amendment.

Other inquiries concerned whether he was aware Spear violated Exchange rules in trading AIG stock and “manipulated the price of AIG stock,” and if he knew “Greenberg manipulated or attempted to manipulate the price of AIG stock?”

SEC attorneys, according to information in the transcript, are working off a variety of documents, phone records and testimony from half-a-dozen witnesses, including personnel who passed on complaints from Mr. Greenberg to Mr. Grasso.

The SEC transcript material was released June 14 by Justice Charles E. Ramos in New York Supreme Court in Manhattan, a county level jurisdiction, where New York State Attorney General Eliot Spitzer has brought suit against Mr. Grasso over his $190 million compensation package.

The transcript was part of the lawsuit, and Mr. Grasso's attorneys argued unsuccessfully to keep it sealed.

Mr. Grasso invoked his Fifth Amendment right against self-incrimination despite warnings that if the SEC brought a civil action against him, “the judge or jury could infer that your answers to the questions might incriminate you.”

A spokesman for Mr. Greenberg said he had no present comment, but on Oct. 10, 2003 he wrote an op-ed piece for The Financial Times, which said in part, “Every chief executive has a duty to his company's shareholders to make certain the specialist is making a fair and efficient market in the company's securities.

“If a CEO believes the specialist is not doing his job according to the applicable laws and regulations, he must speak out to the specialist as well as to the management of the stock exchange, which has the ultimate responsibility for assuring orderly markets.

“Since AIG listed on the NYSE in 1984, I have not hesitated to try to ensure that AIG shareholders have a level playing field. I have regularly contacted our previous and present specialist firms, as well as Goldman Sachs, the owner of our present specialist firm. In addition, I have contacted the chairmen of the NYSE, both Richard Grasso and his predecessors.”

Gerson A. Zweifach, one of Mr. Grasso's Washington-based attorneys, said he had given previous testimony that “there was no wrongdoing and no effort to influence stock price.”

Special Reports /

Grasso Took Fifth 160 Times In AIG Stock Probe

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