An intermediate New York state appellate court has stayedfurther proceedings pending additional arguments in a civiltrial of former American International Group CEO Maurice “Hank”Greenberg and the company's former CFO.

The case stems from allegations that AIG engineered a finitereinsurance transaction that involved an insufficient transfer ofrisk in order to make its financial statement look better, and thatGreenberg knew of it. The case is 8.5 years old.

The First Department of the New York Appellate Division issuedthe order Thursday. The stay was sought by lawyers forGreenberg. They want the trial judge, Justice Charles A. Ramos,removed from the case.

According to court documents, Ramos is prepared to make severalmoves in the case Greenberg's lawyers believe would beinappropriate.

The documents say Ramos is moving “precipitously” to denyGreenberg and Howard Smith, 68, former AIG CFO, a jury trial,making him the “trier of fact.” The brief also said that Ramos isentertaining action on a motion for summary judgment in thecase.

“The trial judge not only has manifested an appearance ofpartiality in this case, warranting recusal, but he has alsoplainly applied the incorrect legal standard in denying” Greenbergand Smith's recusal motion, their lawyers said in the motionseeking the stay.

David Boies, chairman of Boies, Schiller & Flexner, said ina statement following the decision that, “This caseshould never have been brought, and would never have been broughtexcept for former Attorney General [Eliot] Spitzer's efforts tosilence Greenberg's criticism of overly intrusive regulation.”

The case deals with allegedly fraudulent reinsurancetransactions date to 1999 and 2000 and involved GenRe.

The charges were revived by new attorney general EricSchneiderman. He won approval from the Court of Appeals, New York'shighest court in June to proceed with the case. The court voted 7-0to do so.

Greenberg argued in court papers that there was no admissibleevidence that he orchestrated a $500 million transaction withreinsurer General Re Corp that misled AIG shareholders, and thatthe case should have ended in April when the state dropped a claimfor as much as $6 billion in damages.

In his comments, Boies said that over the last 8.5 years, “thecase that was brought has disappeared.”

He said all of the allegations that claimed billions of dollarsof improper inflation of AIG's net income and shareholder equityhave been dismissed.

The attorney general's multi-billion dollar damages claim hasbeen dismissed, Boies said.

“All that remains is an abstract question of whether a finiteinsurance transaction that took place well over a decade ago wasproperly accounted for,” Boies said. “The attorney general has notproduced a single expert willing to opine that the transaction inquestion had any effect on AIG's reported net income orshareholders equity or any material effect on any financialmeasure. No legitimate public purpose justifies theexpenditure of taxpayer resources on the continuation of thislawsuit.”