Hank Greenberg Takes the Stand in AIG Case
September 27 2016 - 4:04PM
Dow Jones News
By Leslie Scism
Former American International Group Inc. Chairman Maurice R.
"Hank" Greenberg took the witness stand for the first time Tuesday
in a long-delayed state court trial for alleged civil fraud.
The New York Attorney General's office is trying to prove Mr.
Greenberg approved two financial maneuvers between 2000 and 2003
aimed at duping shareholders into believing AIG's core insurance
operating results were better than they were. Former New York
Attorney General Eliot Spitzer first filed the lawsuit in 2005.
Mr. Greenberg wasn't asked directly about the allegations during
a morning of testimony but did defend his focus on profits during
the nearly four decades he ran AIG.
"I think any CEO should be focused on the bottom line for their
shareholders," Mr. Greenberg said. "There's nothing new about
that."
David Nachman, a lawyer for the New York Attorney General's
Office, asked Mr. Greenberg about his military service in World War
II and Korea, and his rise at AIG in the 1960s to become CEO and
chairman. While running the New York company, Mr. Greenberg turned
AIG into one of the world's biggest financial-services
companies.
Mr. Greenberg pulled eyeglasses from his coat pocket to read
along as Mr. Nachman quoted from Mr. Greenberg's 2013 book, "The
AIG Story." Mr. Nachman emphasized Mr. Greenberg's focus on turning
a profit with the property and casualty policies sold to business
clients, including setting up internal "profit centers" to
encourage managers to make money for shareholders.
The Tuesday-morning testimony dealt heavily with what led up to
the financial maneuver at issue in the case. The state contends Mr.
Greenberg directed a transaction to mischaracterize underwriting
losses in AIG's auto-warranty business as capital losses.
Insurance investors closely watch underwriting results as core
to a company's operations. The state alleges Mr. Greenberg was
seeking to deceive investors about the strength of those
underwriting results.
Mr. Nachman cited multiple memos and reports that were sent to
Mr. Greenberg in the late 1990s about the program's poor
performance and ways to possibly fix it.
Mr. Greenberg's lawyer, David Boies, said in an opening
statement earlier this month and in court filings that Mr.
Greenberg believed the financial transactions at issue in the
lawsuit were within boundaries of the law and generally accepted
accounting principles.
Mr. Boies contends the state doesn't have any witnesses or
documents that directly link Mr. Greenberg to the actual purported
wrongdoing.
On Tuesday Mr. Greenberg patiently responded to many questions
with an "I don't recall" or saying that something "may have"
happened. Of his deep involvement in trying to fix the unit's
problems, he said: "I wanted to teach people a lesson....I thought
their judgment going into that [auto-warranty program] was
bad."
Write to Leslie Scism at leslie.scism@wsj.com
(END) Dow Jones Newswires
September 27, 2016 15:49 ET (19:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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