A New York judge held former American International Group Inc. CEO Maurice “Hank” Greenberg liable for damages on a reinsurance transaction that state Attorney General Andrew Cuomo said helped the insurer hide losses.
New York State Supreme Court Justice Charles Ramos also found former Chief Financial Officer Howard Smith liable on the transaction, which involved an entity called Capco Reinsurance Co. It was allegedly used to hide more than $200 million of losses from an auto warranty insurance program.
The judge denied Cuomo’s request for a judgment against both defendants over a transaction involving General Re Corp. to boost AIG loss reserves by $500 million without transferring risk. General Re is a unit of Warren Buffett’s Berkshire Hathaway Inc.
The ruling is a setback for Greenberg, 85, who has since 2005 been defending the lawsuit originally filed by Eliot Spitzer, Cuomo’s predecessor as attorney general. Cuomo accused Greenberg and Smith of helping structure the transactions to hide losses. The transactions led AIG to restate its financial statements for the years 2001 to 2004.
Ramos concluded that the evidence “establishes that [the]defendants’ stated objective in effectuating the Capco transaction was not to improve AIG’s assets, but to conceal from investors underwriting losses.” He also said the evidence “connects both defendants to the improper aspects of the Gen Re transaction.” Ramos concluded, though, that it was premature to hold Greenberg liable and that open issues also existed over Smith’s involvement.
The case is New York v. Greenberg et al, New York State Supreme Court, New York County, No. 401720/2005.
Topics New York Reinsurance AIG
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