Ex-American International Group Inc. (AIG:US) Chief Executive Officer Maurice “Hank” Greenberg’s challenge to parts of a ruling that allowed a state lawsuit against him to proceed will be heard by New York’s highest court.
An appeals court in Manhattan yesterday granted Greenberg’s request for permission to appeal its ruling from May, which upheld state Supreme Court Justice Charles Ramos’s October 2010 order denying motions by Greenberg and former AIG Chief Financial Officer Howard Smith to dismiss the lawsuit, according to a court filing.
Former New York Attorney General Eliot Spitzer sued Greenberg and Smith in 2005 in state court in Manhattan, accusing them of using sham reinsurance deals and other transactions to distort the insurer’s financial condition.
“The appeal will determine the validity of the Martin Act, which the New York attorney general and his predecessors have used prodigiously, but with questionable legality in light of conflicting federal standards,” David Boies, an attorney with Boies, Schiller & Flexner LLP in New York who is representing Greenberg, said in a statement.
Lawyers for Greenberg and Smith will present arguments to the state Court of Appeals in Albany on whether New York’s Martin Act securities-fraud statute and Executive Law are pre- empted by federal laws, Boies said.
The federal laws are intended to provide uniform national standards governing securities fraud liability, because the state laws allow claims against corporate executives without “actual knowledge of or participation in the wrongdoing alleged,” Boies said.
The lawyers will also present arguments on whether an action based “solely on hearsay evidence” can survive a motion for summary judgment, Boies said.
“Our office is confident the Court of Appeals will uphold the lower court’s decision, and we look forward to trying this case,” James Freedland, a spokesman for the state attorney general’s office, said in a statement.
“We expect to prevail based on overwhelming evidence, including the defendants’ own testimony,” Freedland said.
The case is State of New York v. Greenberg, 401720-2005, New York state Supreme Court (Manhattan).
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