Hank Greenberg: Left Unchanged, Martin Act Will Drive Businesses Out of New York

NEW YORK — The Martin Act, which gives the New York attorney general extraordinary enforcement powers, will drive companies out of the state unless businesses lobby to change it, according to Starr Insurance Holdings Chairman and CEO and longtime AIG boss Maurice “Hank” Greenberg.

Greenberg has had his own run-in with the Martin Act in a seven-year-old case regarding a transaction that occurred over a decade ago between AIG and Berkshire Hathaway's General Re Corp. Investigators in New York have claimed General Re helped AIG inflate loss reserves without actually transferring risk. 

According to a 2004 story in the legal magazine, Legal Affairs, the Martin Act empowers the AG to subpoena any document, to choose between filing civil or criminal charges at any time and to win a case without proving that a defendant intended to defraud anyone. People called in for questioning also do not have a right to counsel or a right against self-incrimination, according to the article, which notes, “Combined, the act's powers exceed those given any regulator in any other state.” 

In April, the state dropped its claim for damages in the 2005 lawsuit against Greenberg, but New York Attorney General Eric Schneiderman has continued to pursue the case despite being asked by two former governors to drop it. The case was cleared for trial in June.

Greenberg told a crowd of insurance professionals here on Friday, “I've been doing business in New York State for many, many years. I didn't know very much about the Martin Act up until two years ago. And I would urge any public company that does business in New York State to make sure that the general counsel tells you about the Martin Act. Because if it's not changed—and I'm going to lobby for a change very hard—it'll drive most companies out of this state, and the losers will be the population of this great state.”

Greenberg offered his comments before presenting the Free Enterprise Award to his son, ACE CEO and Chairman Evan Greenberg, at an Insurance Federation of New York (IFNY) luncheon. Hank Greenberg received the award in 1979.

In his comments, Evan Greenberg also spoke his mind about regulatory-enforcement efforts and their impact on the insurance industry. He observed, “It's pretty tough to give a Greenberg a microphone and not have us talk a little bit about some of the things on our mind.”

Benjamin Lawsky, superintendent of the New York Department of Financial Services, declined to address the Martin Act specifically when he spoke to the IFNY audience, but he did offer comments about what he saw as regulatory efforts focused more on punishing past missteps than addressing present and future concerns. 

Regarding the Greenbergs, Lawsky said, “It's great to hear you both today in this kind of environment because I think we're all expressing how we really feel and it makes for real dialogue on some of the most important issues today.”