The trial has opened in New York of Maurice ‘Hank’ Greenberg, the former head of insurance group AIG, over civil charges relating to an accounting fraud which took place some 16 years ago
AIG’s former chief financial officer Howard Smith is also named as a defendant in the case, which relates to claims the pair orchestrated a $500m (£378m) transaction designed to falsely boost company’s reserves and a $200m (£151m) transaction intended to hide underwriting losses.
In his opening statement David Ellenhorn, New York assistant attorney general claimed the two men ‘designed, created, negotiated and implemented every major aspect’ of the two transactions, both of which he claimed were fraudulent.
Both Greenberg and Smith have denied the allegations. The charges were originally filed in 2005, but have been subject to legal challenges over the past decade.
David Boies, Greenberg's lawyer, said in his opening that the attorney general's office would not be able to prove any wrongdoing.
‘This case is devoid of any admissible evidence that ties Mr. Greenberg to anything improper in either of these transactions,’ Boies said.
Smith’s lawyer is scheduled to begin his defence today.
Greenberg, who is 91, led AIG for four decades before he was forced out of the company in 2005.
The following year, AIG paid $1.64bn to settle federal and state probes into its business practices.
In the latest case, Ellenhorn said the state was seeking $46m from Greenberg and $6m from Smith, subtracting around $16m the two paid in a 2009 settlement with the US Securities and Exchange Commission over the improper accounting.
Greenberg paid $15m and Smith $1.5m in relations to the SEC’s allegations that were involved in 'numerous improper accounting transactions' that inflated AIG's financial statements between 2000 and 2005. Smith was also suspended from acting as an accountant for five years.
In a statement at the time, the SEC said: 'Greenberg publicly described AIG as the leader in the insurance and financial services industry with a history of delivering consistent double-digit growth. 'However, AIG faced numerous financial challenges under Greenberg's leadership that were disguised through improper accounting.'
Neither of the accused have admitted or denied the SEC's complaint.
The latest trial in a New York state court in Manhattan, will take place three days a week, and is expected to last for up to six months.
