Hank's Last Stand?

There is something unseemly about the face-off in U.S. District Court between Maurice "Hank" Greenberg and AIG over billions in stock supposedly set aside as incentive compensation for employees. This is the final battle in an ugly divorce–one the indomitable Mr. G might not win.

It's amazing to see Mr. Greenberg on the witness stand, after he apparently dodged the bullet in investigations by Eliot Spitzer and the SEC, as well as a prosecution of AIG and General Reinsurance figures in Connecticut over the use of bogus finite reinsurance deals to cook AIG's books and artificially prop up its balance sheet.

People went to jail for that white-collar crime–including Gen Re's former CEO, Ron Ferguson. Prosecutors cited Mr. Greenberg as an unindicted co-conspirator, while the presiding judge said the government's evidence was sufficient for a jury to conclude the conspiracy began with a phone call from Hank.

While the scam's exposure forced a massive restatement of AIG's earnings and prompted his ouster as chair and CEO in 2005, Mr. Greenberg has been getting along just fine, thank you–unless you consider the fact his personal wealth has plummeted along with AIG's stock.

Not only has Mr. Greenberg settled in as head of C.V. Starr, but he has returned with a vengeance from his self-imposed exile in the media wilderness, reasserting his iconic status by appearing regularly on cable news programs and Charlie Rose's PBS talk show to assert how AIG never would have gone into the toilet had he still been in charge.

However, this all-too-public clash of the titans over a trust fund launched to compensate high-performers could turn out to be Hank's Waterloo.

I do not envy the jury its task of sorting through this debacle, as the legalities are no doubt complicated enough to drive rational people to distraction. In fact, our reporter on the scene says jurors are having a hard time staying awake during the arcane arguments.

Will the jury find in favor of Hank? It very well could, especially since AIG is understandably unpopular among civilians these days–particularly when it comes to bonus compensation.

Even though the judge has properly banned any discussion of AIG's recent financial woes as irrelevant to the legal issues at hand, the jurors would have to have been living in a cave to not know AIG is the poster child of the bailout generation.

So will Mr. Greenberg–a small man in his mid-80s being challenged by big, bad AIG–earn the jury's sympathy? Who can say? Anything is possible in a jury room.

But if the jurors are swayed by the damning timeline presented by AIG's attorney–showing how he pitched the fund to employees in "motivational" gatherings and correspondence, the massive turnover in board members orchestrated right after his ouster from his old job, and the physical transfer of stock from a New York bank to friendlier Bermuda–this could start to look like a heist to the Average Joe and Jane, and the verdict might go against him.

The judge–who has reserved judgment over breach-of-trust allegations for himself–might lean the same way.

If Mr. Greenberg does lose this battle, it might discredit him once and for all in the eyes of the press and public, and leave his legacy permanently tarnished. I cannot imagine how he could recover his already tattered reputation from such a death blow.

Still, no one made any money betting against Hank Greenberg.

Sam Friedman is Editor In Chief of National Underwriter. To respond to his column, e-mail sfriedman@nuco.com, go to his blog at www.NUSamSoapbox.com, or follow @NUSam on Twitter.