AIG's Greenberg May Invoke Fifth Amendment Right (Update1)
AIG's Greenberg May Invoke Fifth Amendment Right
April 11 (Bloomberg) -- Maurice ``Hank'' Greenberg, ousted last month as chief executive officer of American International Group Inc., may invoke his legal right to avoid incriminating himself when he testifies before investigators probing the insurer's accounting, defense attorneys and former prosecutors said.
Eliot Spitzer, attorney general for the state of New York, refused to postpone questioning scheduled for tomorrow, the Wall Street Journal reported earlier today, citing unidentified people familiar with the matter.
Greenberg's lawyers had asked for a delay, telling Spitzer that they hadn't received all the documents they need in advance of the deposition, said David Boies, one of his attorneys, in an interview yesterday. They are deciding whether to advise Greenberg, 79, against answering questions, Boies said.
``Statements that seem innocuous and harmless at this juncture may later serve as lethal weapons,'' said Christopher Bebel, a former federal prosecutor who now practices law in Houston.
Greenberg is set to be questioned under oath after New York- based AIG, the world's largest insurer, said March 30 that improper accounting may have inflated its net worth by as much as $1.7 billion over 14 years. Investigators are probing Greenberg's role in a four-year-old reinsurance transaction with Berkshire Hathaway Inc.'s General Re Corp. that AIG now says improperly distorted its finances.
Darren Dopp, Spitzer's spokesman, didn't return phone calls yesterday. U.S. Securities and Exchange Commission spokesman John Nester declined to comment. Robert Morvillo, Greenberg's criminal lawyer, didn't return a voicemail message left at his Manhattan office yesterday.
Questioning Buffett
Spitzer is focusing his AIG investigation on Greenberg, who stepped down as chairman and CEO last month after an almost four- decade reign. Spitzer told ABC News yesterday that he has ``powerful evidence'' and that he may be moving toward a civil or criminal case against Greenberg. AIG ``was a black box run with an iron fist by a CEO who did not tell the public the truth,'' Spitzer told ABC.
Billionaire investor Warren Buffett, Berkshire's chairman and CEO, is set to be questioned today in the investigation. Buffett, 74, is seen as a cooperating witness, not the focus of the investigation, Dopp said last month.
Boies yesterday said Greenberg's lawyers haven't received some of the documents they needed. It would be ``fundamentally unfair to force it to go forward without having a chance to be prepared,'' he said. Boies said April 7 that Greenberg would never have done the General Re transaction had he thought it was wrong.
Greenberg may be tempted to ignore his safest option, said Rusty Hardin, a Houston attorney who represented Arthur Andersen LLP in its failed attempt to avoid obstruction of justice charges tied to Enron Corp.'s collapse.
Reinsurance Probe
``For people like Greenberg who don't believe they have done anything wrong, your first inclination is to tell everyone anything they might what to know,'' Hardin said. ``That isn't always the wisest thing until you know what the other side is contending.''
Spitzer and the SEC last year began probing non-traditional or finite risk reinsurance, a type of reinsurance that became more popular in the 1990s and plays on the boundary between financing and insurance.
The accounting on finite risk can be abused if the insurer classifies what is essentially a low-cost loan from the reinsurer as reinsurance, thereby artificially reducing its liabilities. In the General Re transaction, AIG said March 30 that it shouldn't have been accounted for as reinsurance because there was no risk involved.
Shares of AIG fell 85 cents Friday to $51.91 in New York Stock Exchange composite trading. The stock is down 19 percent since March 14 when Greenberg stepped down as CEO.
To contact the reporters on this story: Christopher Mumma in New York at cmumma@bloomberg.net; Jesse Westbrook in Washington at jwestbrook1@bloomberg.net
To contact the editor responsible for this story: Helen Stock at at hstock@bloomberg.net.
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