Ex-American International Group Inc. Chief Executive Officer Maurice “Hank” Greenberg must face a fraud lawsuit brought by the New York attorney general’s office, the state’s highest court ruled, Bloomberg News reported yesterday. The state can pursue its case over Greenberg’s role in a sham reinsurance transaction and can seek an injunction banning him from the securities industry and from serving as an officer or director of a public company, the state Court of Appeals ruled today. The decision is a blow to Greenberg, who has long argued that the lawsuit, originally filed in 2005 by then-Attorney General Eliot Spitzer, is groundless. Eric Schneiderman, who took over the case when he became attorney general, contends that Greenberg and former AIG Chief Financial Officer Howard Smith bear responsibility for the transaction with General Reinsurance Corp. in 2000 and 2001 that inflated AIG’s loss reserves by $500 million.
