Dueling lawyers put very different spins on the implications of a move last week by the New York attorney general's office to drop a number of charges in the civil case against Maurice Greenberg, American International Group's ousted chairman and chief executive officer, over allegations of improper accounting.

Mr. Greenberg's attorney, David Boies, said last week the AG's office had agreed to drop "key claims" in the case against his client. However, Brad Maione, a representative for New York Attorney General Eliot Spitzer, reacting to that statement, said: "We believe the core of our case remains."

In rebuttal, Howard Opinsky, speaking for the Greenberg legal team, said that "a civil case is about dollars, and the dollars don't add up."

Mr. Maione, in a later e-mail, said that the changes in the case involved dropping AIG as a party, under the settlement that was reached by the company and the AG's office in February. AIG agreed to pay a record $1.64 billion to settle state and federal charges of securities fraud, bid-rigging and failure to pay proper contributions to various state workers' compensation funds.

The AIG settlement did not include Mr. Greenberg, who contends that he and the company did nothing wrong. AIG reached the agreement after Mr. Greenberg had been forced out of the company.

Mr. Maione said the amended complaint no longer asserts an insurance law cause of action--which only involved AIG, not Mr. Greenberg and AIG's former chief financial officer, Howard Smith, who was dismissed by the company.

Further, he said, the amended complaint drops the claim involving AIG's alleged improper accounting of required payments to workers' comp funds, "for which we received a full remedy for the state of New York and hundreds of millions for the other states in the AIG settlement."

Also dropped is a claim the attorney general's office said was remedied when AIG reversed other accounting actions.

The amended complaint "is an effort to streamline discovery, allowing us to focus our efforts on the securities fraud claims at the heart of the case. The remaining claims involve direct efforts by Greenberg and Smith to mislead the investing public about the true state of AIG's financial condition," Mr. Maione wrote.

Those portions of the complaint, he said, include an AIG "sham reserves transaction" with Berkshire Hathaway subsidiary GenRe and other alleged accounting deals involving improper adjusting of books, as well as schemes to disguise underwriting losses that involved Capco Reinsurance Co. Ltd. and Nan Shan Life Insurance Co. in Taiwan.

The latest discussion of the attorney general's action in the Greenberg case is the second time in two years that his office has denied he was softening his stance.

In November 2005, his spokesman, Darren Dopp, confirmed that no criminal charges would be brought against Mr. Greenberg, and said that Mr. Spitzer had never intended to pursue a criminal action. The media had been confused on that point, he said.

However, in May 2005, when he filed suit accusing Mr. Greenberg and Mr. Smith of engaging in a variety of fraudulent business transactions to bolster AIG's stock price, Mr. Spitzer issued a statement saying that AIG management had "routinely and persistently resorted to deception and fraud..."

Meanwhile, Mr. Opinsky said that while the suit does not seek a dollar amount in damages, with the amended complaint the value of the accusations against Mr. Greenberg and Mr. Smith have a "far smaller financial impact."

Mr. Boies, in a statement, said: "We appreciate that the attorney general has kept an open mind, considered the facts we have presented and has now decided to drop these key claims from the complaint. We are confident that when all the facts are out, the remaining claims, which relate to accounting disputes involving much smaller amounts than the claims that are being dropped, will also be dismissed."

Mr. Boies added: "To the extent that the remaining accounting disputes affected AIG's financial statements at all, most of the effect is attributable to accounting decisions that were undisputedly reviewed with, and approved by, AIG's current management."

Vincent Sama and Andrew Lawler, attorneys for Mr. Smith--the company's former CFO, who was dismissed by AIG and is a defendant in the same civil fraud case as Mr. Greenberg--said: "We are pleased by this development and are confident that, after all the facts are considered, the remaining claims will be dismissed."

The case is currently before New York Supreme Court Justice Charles E. Ramos, in Manhattan, a county level tribunal.

The announcement by Mr. Greenberg's attorney noted that earlier this year, his legal team obtained a court order requiring AIG to turn over to Mr. Greenberg the company's so-called "internal investigation" report, which the defense alleges Mr. Spitzer used to base his charges.

Nicholas Gravante, another of Mr. Greenberg's lawyers, told National Underwriter in January that the attorney general "colluded with AIG to concoct an investigation that would justify the forced retirement of Mr. Greenberg and baseless fraud accusations made by the AG on national TV. We intend to use every available legal option to force the AG to turn over all evidence to which Mr. Greenberg is entitled."

Mr. Boies said the legal team is making efforts to expedite discovery to enable them to seek dismissal of the entire case.

The investigation of AIG activity has led to federal criminal charges against three executives from GenRe and one from AIG. Mr. Opinsky noted that these charges related to conduct in recording transactions.

Special Reports /

Spitzer Drops Some Greenberg Charges, But 'Core Of Case' Remains

Related Stories

Recommended For You