Settlement of Martin Act Case Against Former AIG CEO Maurice R. Greenberg and Former AIG CFO Howard I. Smith

In February 2017, our client, the Office of Attorney General Eric T. Schneiderman announced that it had reached a settlement of the Office’s securities fraud suit under the Martin Act against Maurice R. (Hank) Greenberg, the former CEO of American International Group, Inc. (AIG), and Howard I. Smith, AIG’s former Chief Financial Officer. The lawsuit, People v. Maurice R. Greenberg and Howard I. Smith, was brought by Attorney General Eliot Spitzer in 2005, following the admission by AIG that the company had engaged in certain improper reinsurance transactions while Mr. Greenberg was the company’s CEO and Mr. Smith the CFO, including two sham deals – known as the GenRe and Capco transactions – that materially misrepresented AIG’s loss reserves and misstated its underwriting results, respectively, during the period 2000 to 2004. As part of the settlement, Mr. Greenberg and Mr. Smith agreed to give up over $9.9 million that they received as performance bonuses from 2001 through 2004, the period when these sham transactions were reflected on AIG’s books. In addition, both Greenberg and Smith acknowledged that the deals were done in order to increase AIG’s loss reserves and convert underwriting losses into investment losses, and that they “participated in and approved these two transactions,” both of which Greenberg said he initiated. The settlement occurred during a recess in the trial, which began in September 2016.
Our affiliate, Christopher Culp, was retained by the Office of the Attorney General as a rebuttal expert on certain aspects of the GenRe transaction, including whether its implementation was consistent with a genuine finite reinsurance agreement or was more consistent with an agreement that was not intended to transfer any significant risk. The Office of the Attorney General also retained David Ross (an Executive Vice President in our Chicago office) as a rebuttal expert to evaluate the analyses and conclusions expressed by two of Defendants’ experts concerning the materiality of the GenRe and Capco transactions. We worked with Senior Trial Counsel David Ellenhorn, Senior Enforcement Counsel David Nachman and Assistant Attorney General Armen Morian.