Greenberg Steps Down From Witness Stand, Without Much Dramaby
Ex-AIG chairman finishes 5 1/2 days of testimony in fraud case
Greenberg maintains he relied on underlings to handle details
Those in the courtroom on Thursday expecting Maurice “Hank” Greenberg to deliver a passionate defense of his tenure as chairman of American International Group Inc. were likely to be disappointed.
Greenberg completed his testimony at his civil fraud trial after about two hours of friendly questioning from his lawyer, David Boies. Firmly, but without much drama, Greenberg told Boies he was too busy managing AIG 15 years ago to get involved in the nitty-gritty of an accounting scheme. It was the same thing he told a government lawyer over 4 1/2 days of questioning earlier in the trial.
Greenberg is accused by New York state of orchestrating two transactions designed to deceive shareholders. Responding to questions from Boies on Thursday, he reiterated that he relied on his subordinates, including his co-defendant, former AIG Chief Financial Officer Howard Smith, to work out the terms of agreements.
"Did you believe you could rely on what they told you?" Boies asked.
"Of course," Greenberg replied.
"Did you in fact rely on what they told you?"
"Yes," Greenberg said. "Of course."
The lawsuit, filed by in 2005 by Attorney General Eliot Spitzer, alleges that Greenberg and Smith concocted two transactions in 2000 to hide AIG’s true financial condition from its investors -- a $500 million deal with Berkshire Hathaway Inc.’s General Reinsurance Corp. used to offset a decline in loss reserves and an agreement with Barbados-based CAPCO Reinsurance Co. to offload underwriting losses from a failed auto-warranty program.
Greenberg has maintained that both deals were legitimate reinsurance transactions and were properly accounted for and reported. He said he was far too busy as head of the company to pay attention to the details of individual deals. After Boies finished his initial round of questions on Thursday, Assistant Attorney General David Nachman pressed Greenberg for answers on why he chose to get personally involved with the CAPCO deal if he was so preoccupied.
The attorney general claims that Greenberg was so angered over the failure of the auto-warranty program that he took it upon himself to fix the problem. Greenberg testified repeatedly that he only got personally involved in order to "teach a lesson" to those managers responsible for the failed program and remove blame from newer managers.
"You weren’t too busy to take personal interest in the auto-warranty losses, were you?" Nachman asked.
"I was upset by it," Greenberg replied.
"You weren’t too busy to get actively involved in addressing the situation?" Nachman responded.
"Well, it didn’t take very much time," Greenberg said.
The current attorney general, Eric Schneiderman, is seeking to bar Greenberg and Smith from serving as officers or directors of public companies and force them to give up more than $52 million in bonuses. Schneiderman dropped his demand for $6 billion in damages after Greenberg, two companies he heads and three other executives paid $115 million in 2009 to settle suits filed by AIG shareholders.
The trial, which is being heard by New York State Supreme Court Justice Charles Ramos without a jury, is slated to last through January. Proceedings are scheduled to resume on October 25, and Smith is expected to take the stand shortly afterward.
The case is State of New York v. Greenberg, 401720-2005, New York state Supreme Court (Manhattan).