Hank's Last Laugh!

I told you no one ever won any money betting against Maurice Greenberg. While I was skeptical he would beat his old firm, AIG, in a court battle over funds allegedly set aside for executive compensation, wondering whether this would be Hank's "last stand," the jury's verdict instead gives him the last laugh.

I wasn't alone in thinking AIG had the upper hand, as 43 percent of those responding to an NU online poll predicted the verdict would go AIG's way. But it was not to be.

As reported by NU's Mark Ruquet, a federal jury in Manhattan rejected a claim by AIG that Starr International Company, headed by Mr. Greenberg, was obligated to hold shares of AIG stock in trust for retiring AIG employees.

The trial went on for three weeks, with Mr. Greenberg taking the witness stand for seven grueling days of testimony. Yet the jury took only a few hours to come to its verdict in favor of AIG's former chair and chief executive.

The trial was no walk in the park, as noted in Mr. Ruquet's story: "AIG attorney Theodore Wells hammered away at Mr. Greenberg, trying to impeach his testimony, and accused him of lying while on the witness stand."

But Mr. Greenberg kept his cool and in the end got a measure of revenge after having to leave AIG under a cloud, following revelations that the company had misused finite reinsurance deals to artificially bolster its balance sheet–a crime for which five individuals, including one from AIG, were convicted in a separate criminal case.

"We are gratified by the jury's quick and complete vindication of Starr International and Mr. Greenberg, and the jurors' quick and complete rejection of the outrageous personal attacks on Mr. Greenberg's character by AIG and its counsel," said a representative for SICO.

The legal proceedings are not quite over, as U.S. District Judge Jed S. Rakoff must yet decide whether there was a breech of trust or fiduciary duty by SICO in its dealings with AIG.

However, with Mr. Ruquet reporting that the judge had said "in an order before the trial began that the jury's decision on this issue would be used in an advisory capacity," the odds of AIG prevailing on this point appear to be long indeed after the jury so quickly rejected its basic claim.

We'll know for certain next month, when Judge Rakoff is expected to issue his decision. In the meantime, I imagine Mr. Greenberg is sleeping far more peacefully these days.

As for AIG, this is yet another setback in what is turning out to be a never-ending nightmare. Following the verdict, S&P downgraded its recommendation on AIG stock from "hold" to "sell." Then a Citigroup analyst cited "a 70 percent chance that the equity at AIG is zero" after the company's 20-to-1 reverse stock split.

AIG is also reportedly seeking to hand out more bonus payments, which would once again bring down the wrath of commentators and lawmakers. And regulators from New York and Pennsylvania are turning up the heat, conducting market conduct exams of AIG's p&c insurance pricing practices.

But the loss to Mr. Greenberg has got to be the hardest development to swallow.

"We are disappointed by the jury's verdict and we await the court's final ruling. We continue to believe in the merits of our case," AIG said in a statement.

If I were AIG, I wouldn't hold my breath. Would you?

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.