N.Y. AG Cuomo, Greenberg Hit Snag in Settlement Talks

Settlement negotiations between lawyers representing former AIG chief Hank Greenberg and the New York Attorney General are at a stalemate as both sides continue to bicker over how best to describe actions that led to a civil lawsuit charging Greenberg with accounting fraud while he was CEO of the insurance giant, people with knowledge of the matter say.

Greenberg is also balking at the common language that goes with civil regulatory settlements, that the target "neither admits or denies wrongdoing," said person close to Greenberg who added that Greenberg believes that such a statement is "equal to admitting guilt."

A spokesman for Greenberg had no comment.

People with knowledge of the matter say Cuomo's office is seeking a large fine from Greenberg, possibly as much as $100 million or more to bring an end to the three-year-old case, originally filed by former New York AG Eliot Spitzer.

But the sticking point isn’t money—it’s how the final settlement agreement will read, these people say. Greenberg is looking for a deal where the final settlement eliminates or greatly diminishes his culpability in the alleged actions described in the suit alleging that he committed accounting fraud by covering up losses and pumping up reserves at AIG .

One person close to the case describes a possible settlement deal as "50-50" given the tone of the recent negotiations. If a deal isn’t worked out soon, the AG’s office plans to take Greenberg’s deposition some time this month, these people say.

Maurice "Hank" Greenberg
Maurice "Hank" Greenberg

A spokesman for New York Attorney General Andrew Cuomo didn’t return a call for comment. A spokesman for Greenberg had no immediate comment.

People inside Cuomo’s office are betting that in the coming days Greenberg will relent because his attorneys are looking to avoid a deposition, in which Greenberg would be questioned under oath.

The US Attorney’s office won convictions of a former AIG official and several executives from General Re over the same suspicious transaction that is part of the New York AG’s case. “Given the obvious interest from the Feds, the last thing Greenberg’s lawyers want is his a deposition on this,” said one attorney close to the case.

It is typical in civil cases for defendants to settle with admitting or denying wrongdoing. For his part, Greenberg staunchly believes he’s done nothing wrong, and people close to the former AIG chief say he's open for compromise on anything, but will not accept a deal where the language in the settlement even hints that he’s admitting culpability.

“He is willing to settle, but one thing Hank won’t do is admit guilt,” said one person close to Greenberg.