(Reuters) - Maurice “Hank” Greenberg, the former American International Group Inc (AIG.N) chief executive, has reached a settlement that ends his 12-year battle with the New York attorney general’s office, which accused him of orchestrating sham transactions at the insurer.
“After over a decade of delays, deflections and denials by Mr. Greenberg, we are pleased that Mr. Greenberg has finally admitted to his role in these fraudulent transactions,” New York Attorney General Eric Schneiderman said in a statement.
Greenberg, 91, will pay about $9 million and former AIG Chief Financial Officer Howard Smith will pay about $900,000 to settle charges first brought in 2005 by then-New York Attorney General Eliot Spitzer.
The former executives were accused of overseeing a $500 million transaction with General Re, a unit of Warren Buffett’s Berkshire Hathaway Inc (BRKa.N), that boosted AIG loss reserves.
They were also faulted for a transaction with Capco Reinsurance Co that converted a $210 million underwriting loss from an automotive warranty program into an investment loss.
“I knew these facts at the time I initiated, participated in and approved these two transactions,” Greenberg said in a statement. Smith also admitted he knew the facts when he participated in and approved the transactions.
David Boies, a lawyer for Greenberg, in a statement said the attorney general had no evidence that Greenberg was aware at the time he approved the transactions that there was anything improper, “let alone that Mr. Greenberg was aware of any fraud.”
Greenberg’s and Smith’s payments reflect some performance bonuses they received from 2001 to 2004, Schneiderman said.
Friday’s settlement was negotiated with the help of mediator Kenneth Feinberg and averts having to restart a non-jury trial that began in September. That trial was put on hold in November to allow for mediation.
The settlement marks a quiet end to a case that began around the time of Greenberg’s ouster from New York-based AIG, which he had led for nearly four decades.
Schneiderman was forced to drop a $6 billion damages claim after a class action settlement over the accounting won court approval in 2013. Greenberg and other defendants paid $115 million to shareholders in that accord.
But the attorney general pressed ahead, saying it would help ensure public accountability for those accused of fraud.
Though he had sought to ban Greenberg and Smith from the securities industry and from serving as officers and directors of public companies, no bans are part of the settlement.
Boies told Reuters in September that Greenberg nearly settled the New York case in 2008 with a $100 million gift to charity, but that year’s global financial crisis caused the value of Greenberg’s AIG stock holdings to plummet.
In 2009, Greenberg and Smith settled U.S. Securities and Exchange Commission charges over AIG’s accounting, with Greenberg paying $15 million and Smith $1.5 million.
AIG, for its part, agreed in 2006 to pay $1.64 billion to settle federal and state probes into its business practices.
Greenberg is now chairman and CEO of Starr & Co., a private insurance company. Smith is its vice chairman of finance.
Reporting by Karen Freifeld in New York and Sruthi Shankar in Bengaluru; Editing by Savio D'Souza