Former AIG CEO Greenberg settles $9m securities fraud case

Former AIG boss Maurice “Hank” Greenberg, along with former chief financial officer Howard Smith, have agreed to settle a 12-year old $9 million securities fraud case.

In two separate statements, Greenberg and Smith had admitted to initiating, participating and approving two fraudulent transactions committed by AIG while acting as CEO and CFO, respectively.

Both Greenberg and Smith have agreed to return multi-million dollar bonuses they received while the frauds were on AIG’s books.

The lawsuit, People v Maurice R Greenberg and Howard I Smith, was first brought by attorney general Eliot Spitzer in 2005, following admissions by AIG that it had engaged in certain improper reinsurance transactions while Greenberg was CEO and Smith was CFO.

Two of the “sham deals” – the GenRe and Capco transactions, had materially misrepresented AIG’s loss reserves and misstated its underwriting results, respectively, during the period 2000 to 2004.

The office of attorney general Eric Schneiderman, who announced the settlement of the fraud suit, said: “Today's agreement settles the indisputable fact that Mr. Greenberg has denied for twelve years: that Mr. Greenberg orchestrated two transactions that fundamentally misrepresented AIG's finances.

“After over a decade of delays, deflections, and denials by Mr. Greenberg, we are pleased that Mr. Greenberg has finally admitted to his role in these fraudulent transactions and will personally pay $9 million to the State of New York.”

In the last 12 years, Greenberg and Smith have both refused to admit that the GenRe and Capco transactions were improper, or that they were responsible for the transactions.

In 2006, AIG was an original defendant in the attorney general’s suit, and had reached a prompt settlement to pay $1.6 billion to settle the matter.

After Schneiderman took the case against Greenberg and Smith to trial in September 2016, the two defendants have now acknowledged their involvement in these transactions.

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