How To Get A Possession Charge Dropped

SAN FRANCISCO (MarketWatch) -- The legal team representing Maurice "Hank" Greenberg said Wednesday that Eliot Spitzer has dropped "key" charges against the former American International Group chief executive.

However, Darren Dopp, a spokesman for the New York Attorney General, said the "guts" of the civil complaint against Greenberg remain, including charges related to transactions involving Berkshire Hathaway's BRK.A, +0.26% BRK.B, +0.26% General Re division.

Greenberg's lawyers, headed by David Boies, said the "most explosive and financially significant claims" in the suit were dropped pending a potential court order Thursday to compel the production of documents central to Greenberg's defense.

"We are confident that when all the facts are out, the remaining claims, which relate to accounting disputes involving much smaller amounts than the claims that are being dropped, will also be dismissed," Boies said in a statement which was e-mailed to MarketWatch.

Some charges against Howard Smith, AIG's AIG, +2.37% former chief financial officer, were also dropped by Spitzer, according to Vincent Sama and Andrew Lawler, Smith's lawyers.

Dopp said Spitzer only removed charges that were made irrelevant by a settlement AIG announced with regulators earlier this year.

"It's a routine filing and in no way changes the underlying facts in the case against Mr. Greenberg where we alleged fraud in transactions with GenRe and others," Dopp said. "It's absurd to say these are key charges."

Spitzer sued AIG in May 2005, alleging the giant insurer used fraudulent transactions to manipulate its financial statements and deceive regulators and investors. See full story.

Greenberg and Smith were also named as defendants in the civil complaint, which claimed they engaged in "numerous" fraudulent deals that exaggerated the strength of AIG's underwriting business and helped prop up the insurer's share price.

The scandal precipitated the departure of Greenberg and Smith and forced AIG to restate several years' results.

AIG settled with Spitzer and other regulators earlier this year for $1.6 billion, but lawyers for Greenberg and Smith say their clients are innocent and have been fighting back.

The following allegations have been removed from the complaint against Greenberg, according to the attorney general's office and Greenberg's lawyers.

-- That AIG falsely reported income from investments in so-called "life settlements," or viaticals, as underwriting income.

-- That AIG deliberately under-reported workers' compensation premiums it collected to try to reduce money it had to contribute to state-run funds and avoid paying higher taxes.

-- That AIG repeatedly deceived the New York State Insurance Department about its relationships with offshore reinsurers including Union Excess and Richmond Reinsurance Company.

Those issues were addressed by AIG's settlement, Dopp explained, noting as an example that the insurer reimbursed the state's workers' comp system.

The main charge in Spitzer's complaint against Greenberg - that AIG boosted reserves using "sham" reinsurance transactions with GenRe - remain in the complaint, Dopp added.

"The guts of the case are about cooking the books with the help of GenRe and others, and that's still the case," Dopp said.