Former American International Group Inc. Chairman Maurice “Hank” Greenberg says he got personally involved in an “insignificant” business deal at the insurance giant 18 years ago to teach some managers a lesson. Now, that deal is part of a fraud claim that could prevent the 91-year-old from serving as an officer of a public company.

Greenberg took the witness stand Tuesday in a Manhattan courtroom to defend against claims that he and former AIG Chief Financial Officer Howard Smith orchestrated two sham deals to hide the insurer’s financial condition from shareholders. One was a transaction involving CAPCO Reinsurance Co., allegedly to hide more than $200 million in underwriting losses from an auto-warranty business started by Greenberg’s son, Evan.
Greenberg testified that he became aware of serious problems in AIG’s auto-warranty business as early as 1998. He said he began taking steps to correct them the following year, while disagreeing with New York Assistant Attorney General David Nachman’s characterization that he was a “hands-on CEO.”

“This was a small part of our business,” said Greenberg. “It was insignificant.”

“It wasn’t so insignificant that you tried to insert yourself personally into these matters?” Nachman asked.

“I was trying to teach a lesson to some managers who were involved with it,” Greenberg said. “This was a nonevent at AIG. There are other things that are far more important than this.”

“You regard other things are more important than a fraud charge against you?,” Nachman asked.

“That’s why I’m here to defend against it,” Greenberg said.
Greenberg was dressed in a dark-blue suit, a white dress shirt and a light-blue tie. His exchanges with Nachman were sometimes congenial, sometimes contentious.

Home Depot Inc. co-founder Kenneth Langone, a friend of Greenberg’s who has called for the state to drop the case, attended the beginning of Greenberg’s testimony.

The current attorney general, Eric Schneiderman, is seeking to bar Greenberg and Smith from serving as officers or directors of public companies and force them to give up more than $52 million in bonuses. Schneiderman dropped his demand for $6 billion in damages in the case after Greenberg and other executives paid $115 million in 2009 to settle suits filed by AIG shareholders.

The trial, which is being heard without a jury, is likely to last through January. Greenberg had asked the U.S. Supreme Court to review a June decision by New York’s top court allowing the trial to proceed, arguing the state claims are preempted by federal law.

The case is State of New York v. Greenberg, 401720-2005, New York state Supreme Court (Manhattan).