ALBANY, N.Y. – New York Attorney General Eliot Spitzer has dropped two of six civil charges against former American International Group CEO Maurice "Hank" Greenberg and another former executive of the company, a top Spitzer attorney said Wednesday.
Greenberg's legal team said that "the most explosive and financially significant claims" had been dropped.
Spitzer said he will still pursue the most serious accusations involving deceptive accounting claims, but will 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, chief of Spitzer's Investment Protection Bureau.
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 a "the phony nature of many cases pursued by Eliot Spitzer."
"It's a steady, but sure unraveling of this bogus case," said Republican candidate for governor John Faso. He notes 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 written 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 largest single settlement with an individual company in history."
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 in the statement that 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 added.
Boies also said that "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 and regulatory agencies.
The deal — believed to be the largest concluded by regulators with a single company — also required the company to change its business practices to ensure proper accounting procedures in the future.
The settlement did not cover Greenberg, who resigned in March 2005 as chairman and chief executive officer and pledged to fight the Spitzer action in court.
Greenberg was replaced as chief executive by Martin Sullivan, who oversaw two restatements of AIG's earnings back to 2000. The revisions knocked some $2 billion off shareholders' equity and nearly $4 billion off its profits.
Greenberg's chief spokesman, Howard Opinsky, repeated that Greenberg's actions as AIG chief "were legal, based on sound business judgment and in the best interests of AIG shareholders."
Opinsky said AIG shareholders "are owed an explanation as to why $1.6 billion in company funds were spent to settle allegations that do not withstand scrutiny."
The statement issued by Greenberg's legal team also quoted Vincent Sama and Andrew Lawler, lead lawyers for Smith, as saying: "We are pleased by this development and are confident that, after all the facts are considered, the remaining claims will be dismissed."
A Spitzer spokesman insisted that the lawyers for Greenberg and Smith were overstating the significance of the dropped charges, which he described as a routine action.
"It's outrageous and ridiculous, and a reading of the amended complaint shows their claim is ridiculous," Dopp said.
Spitzer faces a Democratic primary for governor on Tuesday against Tom Suozzi, the Nassau County executive.