Reinsurance Focus

In affirming the appellate division’s order against former American International Group, Inc. executives Maurice Greenberg and Howard Smith, the New York Court of Appeals held that claims brought by the State’s Attorney General had enough support to withstand summary judgment. The case, which began in 2005, centers on reinsurance transactions between AIG and General Reinsurance Corporation. The Attorney General alleges that Greenberg and Smith entered AIG into transactions which did little to actually allocate risk amongst the parties but, instead, were used by AIG to increase certain financial metrics. These transactions would benefit AIG’s stock price once better financial numbers were reported in their insurance business. The Attorney General alleges Greenberg and Smith violated the Martin Act and engaged in common law fraud by entering AIG into these contracts.

New York’s high court decided two questions: first, whether the information known by Greenberg and Smith presented an issue of fact for trial; and second, whether the Attorney General was barred from attaining equitable relief from Greenberg and Smith. The court acknowledged that previous criminal proceedings against the two defendants did find enough evidence for conspiracy based on telephone conversations between Greenberg and the General Reinsurance’s CEO. The court also found sufficient evidence in the record to proceed to trial, and allowed for equitable relief to proceed as well. People v. Greenberg, No. 63 (N.Y. June 25, 2013).

This post written by Brian Perryman.

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