Judge takes over questioning ex-AIG chief Hank Greenberg
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Maurice "Hank" Greenberg, former chairman of American International Group Inc., (AIG) arrives at the New York State Supreme Courthouse in Manhattan, New York City, U.S., September 29, 2016. REUTERS/Brendan McDermid
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By Karen Freifeld
NEW YORK (Reuters) - The New York judge weighing whether ex-AIG chief Maurice "Hank" Greenberg should be liable for accounting fraud on Thursday pressed the 91-year-old executive about why AIG had created an offshore entity for losses from a failed automotive warranty program.
Greenberg was on the stand for the third day for allegedly engineering the offshore entity, known as Capco, to hide $200 million in underwriting losses from shareholders.
The transaction is one of two at the heart of a 2005 case against Greenberg that finally went to trial two weeks ago after years of legal wrangling.
Justice Charles Ramos of New York state court in Manhattan, who is presiding over the non-jury trial, took over questioning Greenberg from Assistant Attorney General David Nachman in an effort to cut to the chase.
"There is no one in this room who doesn't think you're a brilliant business manager and a rational person," the judge said, noting there were no clear financial benefits to the company from the Capco transaction. "Why would AIG go through the Capco transaction in the first place? What was the motivation for that?"
Greenberg responded that the transaction was designed to help AIG managers by taking off their books so-called run-off - years of leftover claims from a shut-down auto warranty program. "They were arguing they shouldn't be held accountable for the runoff," he testified.
"They didn't want this negative?" Ramos asked.
"Right. That was the only reason," said Greenberg.
Because the exchange was hard to hear, Ramos summarized Greenberg's testimony to the courtroom.
"And if the shareholders are deceived, that's their problem?" Nachman interjected, drawing an objection from David Boies, Greenberg's attorney.
Nachman then went back to questioning Greenberg, while Ramos urged him to move more quickly.
New York Attorney General Eric Schneiderman is seeking to recoup some $50 million in bonuses paid to Greenberg and his co-defendant, former AIG Chief Financial Officer Howard Smith. He also wants to bar them from the securities industry and from being officers and directors of public companies.
Greenberg still heads C.V. Starr, a private insurance company.
The trial is adjourned until Tuesday, when Greenberg is expected to testify about the other transaction in the case: a $500 million deal that allegedly inflated AIG's reserves.
Greenberg led AIG for four decades before he was ousted in 2005. The following year, the insurer paid $1.64 billion to settle federal and state probes of its business practices.
(Reporting by Karen Freifeld; Editing by Dan Grebler)
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Related EntitiesMaurice R. "Hank" Greenberg, C.V. Starr and Company
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