By Karen Freifeld
NEW YORK Jan 7 New York Attorney General Eric
Schneiderman cannot stop a $115 million settlement between
American International Group Inc shareholders and the
insurer's former chief executive and others, a U.S. judge ruled
The New York Attorney General lacks standing to object to
the settlement, U.S. District Court Judge Deborah Batts in
Manhattan wrote in her decision. She also denied Schneiderman's
request to intervene.
Batts will decide whether to approve the accord reached in
2009 between shareholders and former AIG Chief Executive Maurice
"Hank" Greenberg, former Chief Executive Howard Smith, other
executives and Greenberg's companies C.V. Starr & Co and Starr
The judge set a fairness hearing for April 10 and could
approve the settlement afterward. If she does and no one
appeals, it would effectively end a high-profile civil fraud
case against Greenberg and Smith brought by the Attorney
General's office in 2005.
A spokesman for Schneiderman did not immediately return a
call for comment. A spokeswoman for Boies, Schiller & Flexner,
which represents Greenberg and his companies, had no immediate
comment. Lawyers for the shareholders and Smith also did not
immediately return calls for comment.
The New York Attorney General's plea for the parties to re-
negotiate raises concerns of "undue delay" and demands court
action based on "sheer speculation and hotly contested expert
evaluations," the judge wrote in her ruling.
In August, Schneiderman urged Batts to reject the accord,
saying an expert for shareholders made a math error that caused
the payout to be too low. Lawyers for the shareholders responded
the error had no significant effect.
They also said it was "entirely speculative" to expect the
shareholders to fare better in new talks.
Lawyers for Greenberg, Smith and the Starr entities had also
urged approval of the settlement.
At issue is a 2000 transaction with General Re Corp, a unit
of Warren Buffett's Berkshire Hathaway Inc, which
various government investigators have said allowed AIG to
inflate loss reserves by $500 million without transferring risk.
Schneiderman argued a math error by the expert caused the
transaction to get no weight in the calculation of damages.
Projections and arguments as to the amount of damages
include nothing, $100 million, $543 million, $1.2 billion and
$6.5 billion, the highest estimated by the New York attorney
general's expert, the judge said in her ruling.
The state case against Greenberg and Smith was brought by
former New York Attorney General Eliot Spitzer under the Martin
Act, New York's powerful securities fraud law. Greenberg and
Smith are awaiting an appeal in the case at the state's highest
If the federal accord is approved before the state case, the
"broad terms of the releases" would preclude New York pursuing
its case on behalf of AIG shareholders, Schneiderman has said in
The case is In re American International Group Inc
Securities Litigation, U.S. District Court, Southern District of
New York, No. 04-08141.