Drop the Case Against Hank Greenberg
By KEN LANGONE
The Securities and Exchange Commission has thrown in the towel in its punch-drunk case against Hank Greenberg. The former CEO of AIG agreed to pay a $15 million "no fault" fine in August after a five-year inquiry into the company's accounting practices failed to prove fraud. But one obvious question remains. Why is the New York attorney general's office under Andrew Cuomo still wasting taxpayer money in court over the legal scraps?
Having suffered through similar harassment by the New York attorney general's office under Eliot Spitzer, and in front of the same judge now handling Mr. Greenberg's case, I think I have the answer: It isn't about the money, it's about the ink. Newspaper ink.
Nothing so enchants attorneys general, their eyes generally fixed on higher public office, as slinging accusations against successful financial executives. Preening press conferences and fawning media coverage are virtually guaranteed, whether or not the charges have substance.
Unfortunately, judges can get stars in their eyes too. The honorable Charles Ramos of the New York State Supreme Court presided over my case, where Mr. Spitzer imagined I duped the entire board of the New York Stock Exchange over Dick Grasso's contract. It certainly appeared to me as if he enjoyed the media spotlight as much as Mr. Spitzer did. For a full four years, his every utterance was scribbled down by a gaggle of news reporters.
Yet every charge the attorney general's office made against me was eventually dismissed, and every ruling from Judge Ramos that was appealed was overturned by a New York appeals court. But while it lasted, the press lapped it up.
In the March 26, 2007, edition of the New York Times, Landon Thomas Jr. wrote of such cases that "the details of grand houses, women and wine are fine in and of themselves but they can't substitute for the pleasure a reader feels when a Wall Street executive flies too close to the sun." Reporters may delight in covering such stories, and readers in following them. But in Mr. Greenberg's case, as in mine, it was the attorney general's office that had its wings melted.
The case against Mr. Greenberg is now spinning into its fifth year in front of Judge Ramos. At least, that is, what remains of the original case that Mr. Spitzer built.
It began in April 2005, when Mr. Spitzer appeared on ABC's "This Week with George Stephanopoulos" and said that Mr. Greenberg had committed criminal fraud against shareholders for misstating earnings. But he subsequently failed to file any actual charges—not one.
In March of that same year, Mr. Spitzer's office threatened the board of AIG with a criminal charge of fraud against the company itself. That too went nowhere. When Mr. Sptizer instead filed a civil case in front of Judge Ramos, the two main pillars of that accusation—that Mr. Greenberg deceived regulators about AIG's offshore reinsurance and that AIG falsely reported income—were also eventually withdrawn.
What's left is a highly theoretical argument over how companies should properly account for an obscure instrument known as "finite reinsurance"—about which there is virtually no existing legal precedent. Persuading a jury that Mr. Greenberg somehow deceived shareholders on this matter will be the legal equivalent of pulling a rabbit out of a hat. Yet Mr. Cuomo's office has now asked Judge Ramos for summary judgment on the case—in effect, a hope that he will pull the rabbit out of the hat for them.
He might just try to do that. During his 21 years on the New York Supreme Court, Judge Ramos has issued summary judgment in 203 cases—and has been reversed in whole or in part 54 times, according to the Institute for Judicial Studies (IJS), a nonpartisan research group that studies the track record of judges in the New York region. From 2000 to 2005, he had 267 of his rulings appealed and was rebuked by higher courts nearly a third of the time. In the last three years, Judge Ramos was reversed on appeal 15 out of 32 times—and one of those was my own case. The IJS writes that Judge Ramos's style is "an approach that can lead to unusual decisions [and] sometimes it seems that Ramos almost dares to be overturned."
A far more reasonable course is for Mr. Cuomo to simply drop the case. I have known and respected Mr. Greenberg for more than 30 years, and I can tell you he is uncompromising in defense of his integrity. At the age of 18, he took part in the D-Day invasion at Normandy and later helped liberate concentration camps. At a recent meeting at the Council on Foreign Relations, he stared down Iranian President Mahmoud Ahmadinejad and told him to quit lying about the Holocaust. And by the way, he also built AIG virtually from scratch into one of the most successful companies in American business history. Had Mr. Spitzer's menacing of the AIG board not hounded Mr. Greenberg out of his tenure as CEO—a tenure marked by steadfast policing of risk—AIG would have stood a far better chance of avoiding its current financial plight.
It is time to finally clean house of the last of Mr. Spitzer's legal misadventures as attorney general. The case against Mr. Greenberg has cost taxpayers, AIG shareholders and the credibility of the New York attorney general's office quite enough.
—Mr. Langone is chairman of Invemed Associates.
Poster Comment:
I know, I know, we're not supposed to post advertisements/cv's/resumes but I don't think 4um-ites would hire him anyway.