(Reuters) - Former American International Group Inc Chief Executive Maurice “Hank” Greenberg on Friday settled a 12-year old lawsuit brought by the New York attorney general that accused him of orchestrating sham transactions at the insurer to hide its true financial condition.
“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 and will personally pay $9 million the State of New York,” New York Attorney General Eric Schneiderman said in a statement.
Greenberg, 91, was sued in 2005 by then-New York Attorney General Eliot Spitzer for orchestrating a $500 million transaction with General Re, a unit of Warren Buffett’s Berkshire Hathaway that boosted loss reserves.
The second transaction, with Capco Reinsurance Co, converted a $210 million underwriting loss from a failed 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.
Greenberg’s $9 million payment stems from performance bonuses he received from 2001 to 2004.
His co-defendant, fomer AIG chief financial officer Howard Smith, also settled the case and will pay $900,000 to the state. Smith admitted he knew the facts when he participated in and approved the transactions.
The settlement is a far cry from earlier estimates of liability in the case. Schneiderman, who inherited the lawsuit, was forced to drop damages claims as high as $6 billion after a class action settlment over the accounting won court approval in 2013.
Greenberg and other defendants paid $115 million to shareholders in that settlement.
Schneiderman continued to pursue the lawsuit, saying it was needed to help ensure those who commit fraud, no matter how rich or powerful, are held publicly accountable.
If found liable, he was seeking to ban Greenberg and Smith from serving as officers and directors of public companies and from the securities industry. No bans are part of the settlement.
He also was seeking to claw back more than $50 million in bonuses, with interest.
Greenberg already disgorged $7.5 million in bonuses to SEC in addition to a $7.5 million penalty.
The settlement was negotiated with the help of renowned lawyer, Kenneth Feinberg.
David Boies, the well-known New York attorney who represents Greenberg, could not immedately be reached for comment. Greenberg nearly settled the case in 2008 with a $100 million gift to charity, Boies told Reuters in September, but then the market crashed, affecting the value of Greenberg’s AIG stock holdings.
Greenberg led the New York-based insurance giant for four decades before he was ousted in 2005. The following year, AIG paid $1.64 billion to settle federal and state probes into its business practices
Greenberg is currently chairman and CEO of Starr & Co., a priate insurance company. Smith is its vice chairman of finance.