AIG American International Group Inc

By Leslie Scism 

Maurice R. "Hank" Greenberg struck a $9 million settlement to resolve 12-year-old civil-fraud allegations brought against him by New York's attorney general tied to when he ran American International Group Inc.

In a statement Friday, Mr. Greenberg said that as a result of the transactions in the case, AIG's financial statements "inaccurately portrayed the accounting, and thus the financial condition" of the company in two areas. Reached by telephone Friday, Mr. Greenberg said he was glad the case was finally resolved, saying, "there was no wrongdoing." He said he had wanted mediation for some time.

The settlement enables the 91-year-old to end litigation that capped a long career at AIG in which he built the company into a global powerhouse. Mr. Greenberg ran AIG for nearly 40 years before being pushed out in 2005 as a probe by then-New York Attorney General Eliot Spitzer was under way.

Mr. Greenberg's longtime lawyer, David Boies, said in an interview that, in settling, his client "is not acknowledging anything improper."

New York's current attorney general, Eric Schneiderman, issued a news release late Friday with a headline saying Mr. Greenberg "Admits to Initiating, Participating and Approving Two Fraudulent Transactions." Mr. Greenberg admitted to his involvement in the transactions, Mr. Boies says, but not in fraud. He has said he relied on advisers in making the decisions.

The state's allegations pertain to a pair of financial transactions that the state alleged were designed to deceive shareholders by making AIG's results appear rosier than they were. One of them involved bolstering AIG's claims reserves, which some investors monitor closely for signs of health of an insurance company.

Mr. Greenberg and the attorney general's office agreed to mediation late last year as the long-delayed trial, in a state court in lower Manhattan, was in a middle stage. Testimony began in September, and the state wasn't through laying out its evidence, after about 16 partial and full days in court, when it paused for the settlement talks.

The mediation was overseen by Kenneth Feinberg, an attorney who specializes in alternative dispute resolution.

The elderly Mr. Greenberg testified for six days last fall, including long stretches of tough questioning by the state as attorneys walked through details of the long-ago transactions.

For much of the time, Mr. Greenberg spoke softly and calmly, frequently telling the state's lawyers that he couldn't recall the specifics of meetings and conversations from so long ago. He got testy a few times when the lawyers pushed hard for recollections.

Mr. Greenberg had phoned the chief executive of Berkshire Hathaway Inc.'s General Re unit to initiate one of the two transactions. That "reinsurance" deal boosted AIG's reserves at a time some analysts and investors were concerned about whether the levels were sufficient, but the state said they had no other obvious economic purpose. Berkshire wasn't named as a defendant in the lawsuit.

AIG itself faced allegations of accounting improprieties by New York authorities. In 2006, it agreed to a $1.6 billion pact, split between the Securities and Exchange Commission and New York, to settle the civil-fraud charges. It earlier had restated prior earnings, including changing the accounting for the two transactions.

Also testifying last fall in the nonjury trial was Howard Smith, who was AIG's finance chief for Mr. Greenberg at the time of the deals. He similarly faced civil-fraud allegations brought by the attorney general and has newly reached a settlement with the state, Mr. Schneiderman's office said.

AIG declined to comment. The government originally had sought billions in damages.

Write to Leslie Scism at leslie.scism@wsj.com

(END) Dow Jones Newswires

February 10, 2017 19:17 ET (00:17 GMT)

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