Wednesday, April 21, 2010

A Devastating Twist for Hank Greenberg

This is a bad week for Hank Greenberg. He must be pretty stunned after his hearing Tuesday before a New York State Supreme Court justice. For years, Hank Greenberg has been saying he didn’t bring down AIG, but now he’s facing a “devastating” case in a lawsuit accusing him of using bogus transactions to improperly inflate the company’s finances and mislead analysts. This isn’t just a personal matter for Greenberg--the entities he controls are AIG’s biggest shareholders and he advises current CEO Robert Benmosche.

The New York Times is reporting that Justice Charles E. Ramos said the fraudulent transactions AIG was involved with were “a criminal enterprise” and called the case against Greenberg “devastating.” Up until now, Greenberg has won most of the cases and legal maneuvers he’s faced since his ouster from AIG in 2005. The biggest was between AIG and SICO, a Bermuda-based holding company, over who owned a disputed $16 billion block of AIG stock. In that case, a jury sided with Greenberg.

The irony about this week’s hearing on sham transactions is the case was originally brought by Elliot Spitzer. Many thought Greenberg would walk away from this, and it would become yet another example of how Spitzer overreached in going after corporate executives. But Judge Ramos indicates this case could now be heading to an appellate court. If Greenberg wins, his reputation is finally restored. But this week, he took one of his biggest hits since he was forced out of the company he built.

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