Cuomo on Hank Greenberg's denial: 'Incredible and irrelevant'

Maurice “Hank” Greenberg, American International Group Inc.'s ex-chief executive officer, testified in a pre-trial interview that he had no role in a fraudulent reinsurance transaction, while lawyers for New York state said his testimony was “both incredible and irrelevant.” Greenberg, 84, testified in a deposition in March as part of a lawsuit brought by then-New York Attorney General Eliot Spitzer in 2005 that claims AIG used sham transactions to hide losses and inflate reserves. Greenberg asked in September that Spitzer's lawsuit be dismissed. Greenberg invoked his Fifth Amendment right against self- incrimination when he was questioned in 2008 about transactions involving AIG and General Re Corp., the reinsurer owned by Warren Buffett's Berkshire Hathaway Inc. A federal probe of the Gen Re transaction led to the criminal convictions of seven people. “It is not possible to find greater involvement in a fraudulent transaction by a chief executive officer,” Cuomo's office said in court papers. “Greenberg's perfunctory denial that he explicitly discussed the no risk aspect of the deal,” the state said, “in the face of contemporaneous documents and testimony to the contrary is both incredible and irrelevant.” In court papers filed yesterday, Greenberg again asked that the lawsuit be dismissed, arguing that after his March deposition, the state had failed the requisite “showing of a knowing and intentional agreement to participate in wrongful conduct,” his lawyers David Boies and Robert Morvillo said. Boies and Morvillo said that deposition showed “the lack of any impropriety on Greenberg's part with respect to the Gen Re transaction.” Cuomo's office “can point to no admissible evidence establishing that Greenberg knew or should have known that the Gen Re transaction was improper or that his reliance on the professionals who participated in the transaction was unreasonable.” Lee Wolosky, another Greenberg lawyer, said in an e-mailed statement that most of the state's claims already have been dismissed. “What is ‘incredible' is that the Attorney General continues to waste public resources pursuing allegations concerning immaterial transactions that have been discredited by five years of legal proceedings and voluminous witness testimony,” Wolosky said in the statement. “‘And what is ‘irrelevant' are the inadmissible and inaccurate statements the Attorney General's office is using to keep these discredited allegations on life support.” New York State Supreme Court Justice Charles Ramos, the judge in Manhattan presiding over Cuomo's lawsuit, will hold a hearing on April 20 in which Greenberg will formally ask for the case to be dismissed while the state will argue for summary judgment, or a win, before trial on the case. Spitzer's lawsuit accused Greenberg and former AIG Chief Financial Officer Howard Smith of using sham reinsurance deals and other transactions to distort the reported financial condition of the company. Greenberg and Smith yesterday repeated their request for Ramos to dismiss the suit, arguing that the judge shouldn't draw an “adverse inference” because they initially invoked their right against self-incrimination. New York-based AIG, once the world's largest insurer, ousted Greenberg and Smith in March 2005, two months before Spitzer sued them. Spitzer dropped portions of the case in 2006. Four former Gen Re executives, including ex-CEO Ronald Ferguson, and one from AIG, Christian Milton, were convicted in 2008 at a fraud trial focusing on the transaction. The fraud cost AIG shareholders $544 million to $597 million, ruled the federal judge in Hartford, Connecticut. Two other Gen Re executives pleaded guilty. The transaction preceded the 2008 financial crisis at AIG, which got a bailout of $182.3 billion from U.S. taxpayers. AIG said on Oct. 26, 2000, that premiums increased in the third quarter of that year as loss reserves for claims fell. Five days later, Greenberg asked Ferguson to help with AIG's reserves, a key measure of an insurer's health. AIG and Gen Re, based in Stamford, Connecticut, engaged in sham transfers of policies and premiums between them that allowed AIG to inflate its loss reserves by $500 million, the government said. Prosecutors said the transaction was phony because it involved no transfer of risk between the two companies. Greenberg said he testified in his deposition that “he asked for a legitimate reinsurance transaction from Gen Re, and his testimony is corroborated by substantial independent evidence,” according to his filing. “Greenberg testified that he never requested or agreed to a ‘no risk' transaction,” his lawyers wrote. “Not a single witness has testified to a direct conversation with Greenberg in which he agreed to participate in or authorized fraudulent conduct. Not a single document authorized by or sent to Greenberg demonstrates his involvement in fraudulent conduct.” Cuomo's filing yesterday disputed Greenberg's claims. “Greenberg, whose autocratic style and attention to detail were legendary, cannot seriously contend that he approved a $500 million reinsurance transaction -- the largest ever done by AIG -- without discussing with Ferguson and Milton the very essence of the deal,” according to Cuomo's filing. Greenberg and Smith certified financial statements for four years that reflected the $500 million in reserves, according to Cuomo's filing. Both men “knew, and certainly easily could have known, that the Gen Re deal involved no risk,” according to Cuomo's filing. “At the very least, they had absolutely no basis for concluding that there was risk.”