Former American International Group CEO Maurice "Hank" Greenberg failed to persuade New York state's highest court to dismiss a lawsuit seeking to hold him accountable for sham transactions at the insurer.
The unanimous decision Tuesday by the state's Court of Appeals is a victory for New York Attorney General Eric Schneiderman, who has been pursuing a case first brought in 2005.
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Greenberg, 88, has argued that there was no admissible evidence that he orchestrated a $500 million transaction with the reinsurer General Re that misled AIG shareholders, and that the case should have ended in April, when the state dropped a claim for as much as $6 billion in damages.
But in its 7-0 decision, the Court of Appeals said there was easily enough evidence that Greenberg and his co-defendant, former AIG Chief Financial Officer Howard Smith, knew that the transaction was fraudulent to proceed to trial.
"We have no difficulty in concluding that ... there is evidence sufficient for trial that both Greenberg and Smith participated in a fraud," Judge Robert Smith wrote for the court.
The judges also ruled that the attorney general could seek to ban the two former executives from participating in the securities industry and serving as officers and directors of public companies.
Greenberg led AIG for nearly four decades before being ousted in 2005. The following year, AIG paid $1.64 billion to settle federal and state probes into its business practices.
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The Greenberg case was brought by former state Attorney General Eliot Spitzer and was later pursued by his successor, Andrew Cuomo (now New York's governor), and Schneiderman.
The appeal originally included a highly anticipated challenge to New York's Martin Act, a powerful 1921 securities fraud statute that Spitzer used aggressively in his battle against Wall Street. That issue become moot after Schneiderman withdrew the damages claim.