NY state settles fraud lawsuit vs. former AIG CEO Greenberg
NEW YORK (AP) — A 12-year legal battle between state prosecutors and the former chief executive of insurance company American International Group Inc. has been settled, both parties announced Friday.
A lawsuit claimed ex-AIG chief executive Maurice “Hank” Greenberg and ex-chief financial officer Howard Smith had manipulated AIG’s accounting records in 2000 and 2001 to hide hundreds of millions of dollars in losses from investors.
New York Attorney General Eric Schneiderman said the settlement, reached through a mediator, requires Greenberg to pay $9 million he received as performance bonuses. The settlement also requires Smith to pay $900,000.
AIG is one of the world’s largest insurance companies. It nearly collapsed in 2008 at the height of the financial crisis and received about $180 billion in bailout aid.
Greenberg, 91, said in a statement that the process required him and Smith to accept whatever recommendations were made by mediator Kenneth Feinberg.
“Although I do not agree with all of what he has proposed, because I agreed to the process, I accept his recommendations so that this matter can finally be resolved after a ludicrous 12-year pursuit by the attorney general,” said Greenberg, who was the CEO until his retirement in 2005. “In accepting Mr. Feinberg’s recommendations, I want to reiterate and reaffirm that I did nothing wrong.”
The settlement does not ban Greenberg from working in the securities industry or as an executive for any public company, as the state lawsuit had sought.
AIG paid a record $1.64 billion in February 2006 to settle civil fraud charges with federal and New York authorities, and it apologized for having deceived investors and regulators with misleading accounting practices stretching back two decades.
Greenberg and Smith settled related federal Securities and Exchange Commission complaints without admitting wrongdoing in 2009.
“Today’s agreement settles the indisputable fact that Mr. Greenberg has denied for 12 years: that Mr. Greenberg orchestrated two transactions that fundamentally misrepresented AIG’s finances,” said Schneiderman, a Democrat.
Former Attorney General Eliot Spitzer made Greenberg one of his targets in his 2005 crackdown on Wall Street executives he believed cheated investors. Spitzer, also a Democrat, later was elected as governor and resigned in 2008 amid a prostitution scandal.
Associated Press Writer Larry Neumeister contributed to this story.