Fewer Charges for AIG Ex-CEO

New York Atty. Gen. Eliot Spitzer on Wednesday dropped two of six civil charges against former American International Group Chief Executive Maurice “Hank” Greenberg and another former executive of the company.

Greenberg’s legal team said that “the most explosive and financially significant claims” had been dropped.

Spitzer, the Democratic candidate for governor of New York, said he would still pursue the most serious accusations involving deceptive accounting claims, but would drop charges that became moot after AIG settled a case brought by Spitzer against the company, paid some restitution and adopted accounting reforms.

“The heart of the case remains,” said David Brown, a Spitzer deputy.

The two dropped charges involved a scheme Spitzer said was intended to make investment income look like underwriting income, strengthening AIG’s financial picture. The other claim alleged that Greenberg and former AIG Chief Financial Officer Howard Smith were part of a scheme to hide workers’ compensation payments.

Spitzer’s Republican opponent for governor called the action proof of “the phony nature of many cases pursued by Eliot Spitzer.”

“It’s a steady but sure unraveling of this bogus case,” John Faso said. He noted that the case began with claims of criminal and civil charges and a threat of an indictment against the company.

“This case produced the largest regulatory settlement for corporate fraud in history,” Spitzer spokesman Darren Dopp said in a statement. “If Mr. Faso thinks that’s ‘bogus,’ he’s definitely not on the side of investors or workers. AIG settled with regulators earlier this year for $1.6 billion.”

The remaining charges involve what Spitzer said was a plot to “mislead the investing public about the profitability of AIG and its skill at underwriting,” Brown said.

David Boies, lead lawyer for Greenberg, said he appreciated that Spitzer “has now decided to drop these key claims from the complaint.”

“We are confident that when all the facts are out, the remaining claims, which relate to accounting disputes involving much smaller amounts than the claims that are being dropped, will also be dismissed,” he said.

Boies added, “To the extent that the remaining accounting disputes affected AIG’s financial statements at all, most of the effect is attributable to accounting decisions that were undisputedly reviewed with, and approved by, AIG’s current management.”

New York-based AIG, one of the world’s largest insurance companies, announced in February that it would pay $1.64 billion to resolve allegations that it used deceptive accounting practices to mislead investors.