It was American International Group accounting change blunders in 2005 that hurt the company's stock, not any misdeeds on his part, AIG's ousted chairman and chief executive officer, Maurice Greenberg, argues in new court papers.

A filing by his attorneys was made Tuesday in Manhattan's New York State Supreme Court–a county level tribunal–where Mr. Greenberg and AIG's former chief financial officer, Howard Smith, are defendants in a civil case brought by the New York Attorney General's Office alleging market fraud at the insurer.

Meanwhile, today in Delaware, a judge rejected Mr. Greenberg's effort to file a lawsuit against various AIG board members and executives–including Martin Sullivan, who succeeded him as AIG's CEO.

In the New York case, Mr. Greenberg's arguments were contained in a motion filed by his attorneys with Justice Charles E. Ramos, seeking to compel deposition testimony from three AIG executives that he said is needed to make his case.

The executives in question are AIG Deputy Comptroller Anthony Valoroso (formerly director of technical accounting); Jeffrey F. Johnson, AIG technical services senior vice president for toxic torts; and Perry Huntington, AIG senior vice president for environmental.

AIG was originally a defendant in the case with Mr. Greenberg, which alleges that improper transactions took place designed to boost the firm's stock price. The insurance company was let out of the case after agreeing to a $1.6 billion settlement.

At that point the company had issued a financial restatement, reducing AIG's net income between 2000 and 2004 by $3.92 billion, and trimming shareholder equity as of Dec. 31, 2004, by $2.26 billion.

According to Mr. Greenberg's legal memo and motion, he and Mr. Smith are only alleged to have involvement in four of 30 accounting changes involved in the restatement.

Mr. Greenberg's papers said he wants to depose the three AIG officials to show that, rather than any of those four items affecting the price of the stock, that any drop or inflation “resulted from elements of the [financial] restatement that were included therein by current AIG management but were unrelated to the four transactions…”

AIG's restatement and his own ouster by the company followed the threat of a criminal prosecution by then Attorney General Eliot Spitzer, according to Mr. Greenberg's papers.

According to his filing, the restatement reduced billions of dollars in AIG's net income and shareholder's equity “as a result of retroactive accounting changes made either erroneously or unnecessarily by AIG.”

The papers contend some AIG management moves were “wrong under applicable accounting rules,” and some retroactive reductions “were wholly unnecessary.” Items mentioned included asbestos reserve estimate changes and treatment of AIG's life settlements program.

Mr. Greenberg's attorneys last year secured an order from Judge Ramos compelling AIG to turn over an internal report on accounting infractions.

His lawyer, Nicholas Gravante, said the report was biased and designed to throw all the blame for accounting irregularities on Mr. Greenberg, while shielding current officers of AIG, and was used by Mr. Spitzer's office to decide who to charge in the case.

In the Delaware Court of Chancery, Mr. Greenberg is the target of a stockholders suit initiated by the Teachers' Retirement System of Louisiana, seeking millions of dollars in payments made by AIG to C.V. Starr & Company–the insurance broker that was owned by Mr. Greenberg and favored AIG executives.

Currently Mr. Greenberg is chairman and CEO of C.V. Starr and Company.

Mr. Greenberg had sought to counter-sue Mr. Sullivan, as well as dozens of other AIG executives and board members, arguing they were more to blame than he was for any wrongdoing involving the ties between the public insurance company and the private Starr brokerages.

However, Vice Chancellor Leo Strine denied the countersuit.

Mr. Greenberg and his co-defendants–former CFO Smith and Edward E. Matthews, former AIG senior vice chairman for investments and financial services–can make the case that Mr. Sullivan and others should pay the largest share of damages, if any, after the main trial determines whether there was anything wrong in the payment of millions in fees and commissions by AIG to Starr, Judge Strine found.

After Mr. Greenberg's ouster at AIG, the company's board agreed to stop fighting the Teachers' Retirement System of Louisiana lawsuit and support it against Mr. Greenberg, Mr. Smith, Mr. Matthews and C.V. Starr in a deal that let Mr. Sullivan and others connected to both AIG and Starr out of the suit.

Special Reports /

Greenberg Blames Restatement For AIG Stock Woes

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