Time to pull the plug on NY’s Hank Greenberg suit
By Reynolds Holding
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
It’s time to pull the plug on New York’s lawsuit against Hank Greenberg. The case accusing the former AIG boss of defrauding investors has already outlasted two of the state’s attorneys general. After losing a ruling Wednesday, a third should call it quits. His office is plenty busy pursuing financial-crisis cases and other scams. It doesn’t need this eight-year-old distraction.
The suit involves what seemed at the time to be innocuous reinsurance deals. But in 2005, then-Attorney General Eliot Spitzer contended they were illegal schemes to hide losses and inflate AIG’s insurance claim reserves. Though a judge at one point called the case “devastating,” it languished for years as Spitzer and his successor, now-Governor Andrew Cuomo, struggled to connect Greenberg with the alleged fraud.
On Wednesday, a court approved the former CEO’s settlement with AIG investors in a parallel federal lawsuit, making the state’s case essentially moot. With nothing to show after all this time, current Attorney General Eric Schneiderman ought to drop it.
He doesn’t have much to lose. Schneiderman has already put federal prosecutors to shame by suing JPMorgan last October in a multibillion-dollar mortgage security case. And as co-chair of a national mortgage task force, he’s touting more suits to come. Backing off a case that most people have already forgotten wouldn’t diminish his reputation for holding Wall Street’s feet to the fire.
A judge may force his hand in any event. Five years ago, a New York court ruled that the attorney general couldn’t pursue damages for victims of an alleged credit card fraud when a judge had already approved a class action settlement over the same scandal. The precedent probably means that Schneiderman’s lawsuit is toast. He may try to keep it alive by arguing that he can extract additional compensation, but that hardly seems worth the effort.
Greenberg, meanwhile, probably deserves a break. Litigation starts to look abusive after nearly a decade, depriving the former CEO of the certainty that the law requires. Besides, Greenberg has a lot on his docket. The 88-year-old recently doubled to $55 billion the size of his class-action lawsuit against the government over AIG’s 2008 bailout.