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Ex-AIG chief Greenberg settles, admits approving fraud
[NEW YORK] Two former executives at US insurance giant AIG admitted Friday to approving fraudulent transactions which masked the company's financial health, ending a 12-year court battle in New York.
Former CEO Maurice "Hank" Greenberg and Howard Smith, the company's former chief financial officer, admitted to overseeing the transactions, which were designed to hide losses and inflate reserves, the New York State Attorney General's Office said.
Greenberg agreed to pay US$9 million, representing much of the bonuses he received between 2001 and 2004, the period when the transactions appeared in the company's financial results.
The settlement brought an end to a legal saga initiated in the pre-financial crisis era by then New York Attorney General Eliot Spitzer in 2005.
AIG itself had settled with New York in 2006, paying US$1.6 billion to resolve the matter. Later elected governor, Spitzer stepped down in 2008 in the wake of a prostitution scandal.
Greenberg and Smith finally went on trial in September, after years of delay as defense lawyers battled the charges.
Attorneys for Greenberg argued he could not have been aware of the transactions, given the size and complexity of the company.
Prosecutors alleged that Greenberg and Smith engineered a US$500 million transaction with Berkshire Hathaway's General Re to bolster AIG's loss reserves improperly and oversaw another transaction with an offshore company to convert underwriting losses into investment losses.
Eric Schneiderman, the current attorney general, said Friday that Greenberg's resistance had finally come to an end.
"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," Mr Schneiderman said in a statement.
In a statement published by the Attorney General's office, Greenberg, 91, said he had been aware of the transactions and involved in both.
"I knew these facts at the time that I initiated, participated in and approved these two transactions," Greenberg was quoted as saying. He added that as a result of them, financial statements relied on by investors "inaccurately portrayed" the company's financial health and performance.
Similar wording appeared in a statement in Smith's name.