New York Suit Against Greenberg Allowed to Proceed

A New York State appeals court ruled on Tuesday that a lawsuit by the attorney general against Maurice R. Greenberg, the former chief executive of the American International Group, can proceed.

The decision by the Court of Appeals will let the attorney general, Eric T. Schneiderman, move forward with an eight-year-old case first brought by Eliot L. Spitzer and then by Andrew M. Cuomo â€" and could eventually lead to an appearance by Mr. Greenberg on the stand.

The battle arises from accusations that Mr. Greenberg and a former chief financial officer of A.I.G., Howard Smith, allowed the insurer to commit accounting fraud that led to a $3.9 billion restatement in 2005. The case predates the firm’s $182 billion government bailout during the financial crisis of 2008.

Earlier this year, Mr. Schneiderman took the unusual step of dropping his right to contest the settlement of a separate class-action lawsuit, pushing instead with his effort to bar Mr. Greenberg from the securities industry ! and from serving as a director or officer of a publicly traded company.

Some have publicly questioned the wisdom of pursuing the lawsuit. Two former New York governors, Mario Cuomo and George Pataki, wrote an op-ed in The Wall Street Journal earlier this year that criticized Mr. Schneiderman’s efforts as “a dead-end case” that was not a worthwhile endeavor.

In its decision, the appeals court noted the long duration of the lawsuit, writing, “The course of the litigation has been long, and some issues have fallen by the wayside.” But the judges dismissed arguments by lawyers for Mr. Greenberg and Mr. Smith that other legal battles, including a lawsuit by the Securities nd Exchange Commission, fully covered all possible relief.

“There is no doubt room for argument about whether the lifetime bans that the attorney general proposes would be a justifiable exercise of a court’s discretion,” the judges wrote. “But that question, as well as the availability of any other equitable relief that the attorney general may seek, must be decided by the lower courts in the first instance.”

Damien LaVera, a spokesman for Mr. Schneiderman’s office, said in a statement: “Attorney General Schneiderman is committed to ensuring that anyone who commits fraud is held accountable for their actions no matter how wealthy they are or how many powerful friends they have. Today’s decision means we will have an opportunity to establish in court Hank Greenberg’s role in this fraud and hold him accountable.”

David Boies, a lawyer for Mr. Greenberg, said in a statement: “We are pleased that the attorney general’s claim for damages, which throughout the eight years of this litigation has been the focus of the case, has now been dismissed. We are disappointed that the Court of Appeals did not dismiss the attorney general’s recently raised claims for injunctive relief, but we are confident that the action will be dismissed by the lower courts because the state cannot demonstrate that it is entitled to injunctive or disgorgement remedies against Mr. Greenberg and Mr. Smith.”