U.S. top court rejects AIG ex-CEO Hank Greenberg's appeal

By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Monday rejected former American International Group CEO Maurice "Hank" Greenberg's bid to escape civil fraud charges in New York accusing him of orchestrating sham transactions at the insurer.

The justices left in place a June ruling by the New York Court of Appeals that his trial on charges brought by the New York Attorney General's Office could proceed. The non-jury trial of Greenberg, 91, started in September. He has already testified in his own defense.

But the parties agreed at the end of November to put the trial on hold until January while they enter into mediation aimed at resolving the case.

Greenberg's lawyers declined to comment on the Supreme Court action. A spokesman for New York Attorney General Eric Schneiderman had no immediate comment.

Greenberg led the New York-based insurance giant for four decades before he was ousted in 2005. The following year, AIG paid $1.64 billion to settle federal and state probes into its business practices.

He has asserted that the case should have been over in 2013 when a $115 million settlement with AIG shareholders over improper accounting received court approval. New York was forced to drop its damages claims because of that decision.

Justice Charles Ramos of New York state court in Manhattan is presiding over Greenberg's trial, and in September began directly questioning Greenberg.

The appeals court also ruled in June that the state could seek to recoup from Greenberg and co-defendant Howard Smith, AIG's former chief financial officer, tens of millions of dollars in bonuses and interest covering the 2000-2005 period when the alleged fraud occurred. More than $55 million may be at stake.

In addition, the court said the state could seek to ban Greenberg and Smith from the securities industry and from serving as officers or directors of public companies.

Greenberg currently is chairman and CEO of CV Starr & Co, a private insurance company. Smith is its vice chairman of finance.

AIG was rescued by the U.S. government in September 2008 to stave off bankruptcy after the company ran up billions of dollars in losses stemming from insurance it wrote on shoddy mortgage securities.

The case was brought under the Martin Act, the 1921 New York law that former New York Attorney General Eliot Spitzer revived in the early 2000s to go after major financial institutions. In November, Schneiderman raised concerns that President-elect Donald Trump would seek to weaken the state law.

At issue are two transactions, the first concerning General Re, a unit of Warren Buffett's Berkshire Hathaway. The suit claims Greenberg orchestrated a $500 million transaction that boosted loss reserves without transferring risk.

The second transaction, with Capco Reinsurance Co, allegedly hid a $210 million underwriting loss in an auto-warranty program.

(Reporting by Lawrence Hurley. Additional reporting by Karen Freifeld; Editing by Will Dunham)