People v. Greenberg, 21 N.Y.3d 439 (2013)
In a civil fraud case brought by the Attorney General, summary judgment is inappropriate where sufficient evidence exists to raise a question of fact regarding a defendant’s knowledge and participation in a fraudulent transaction.
Summary
The New York Attorney General sued Maurice Greenberg and Howard Smith, former officers of AIG, alleging fraud related to a sham reinsurance transaction with GenRe. The Attorney General claimed the transaction was designed solely to inflate AIG’s insurance reserves and boost its stock price. After a federal class action settlement, the Attorney General pursued only equitable relief, including potential bans on participation in the securities industry and serving as officers or directors of public companies. The Court of Appeals held that sufficient evidence existed to raise a question of fact regarding Greenberg’s and Smith’s knowledge of the fraud, precluding summary judgment. The Court also determined that the possibility of additional equitable relief beyond a prior SEC settlement remained open for consideration.
Facts
Maurice Greenberg and Howard Smith were former CEO and CFO, respectively, of AIG. The Attorney General alleged that Greenberg and Smith participated in a fraudulent reinsurance transaction between AIG and GenRe. The transaction purportedly transferred no real risk but was designed to inflate AIG’s reported insurance reserves. The Attorney General asserted the scheme aimed to create a false impression of AIG’s financial health to investors.
Procedural History
The Attorney General initiated a civil suit against AIG, Greenberg, and Smith. AIG settled the case. A federal class action lawsuit was also settled. The Attorney General withdrew claims for damages and pursued only equitable relief. The Supreme Court denied summary judgment to both sides. The Appellate Division affirmed the denial of summary judgment to Greenberg and Smith. Greenberg and Smith appealed to the Court of Appeals from that portion of the Appellate Division order. The Attorney General did not appeal the denial of their own motion for summary judgment.
Issue(s)
1. Whether the evidence of Greenberg’s and Smith’s knowledge of the fraudulent nature of the AIG-GenRe transaction is sufficient to raise an issue of fact for trial.
2. Whether, on the present record, the Attorney General is barred as a matter of law from obtaining any equitable relief.
Holding
1. Yes, because there is sufficient evidence for trial that both Greenberg and Smith participated in a fraud, and the credibility of their denials is for a fact finder to decide.
2. No, because it cannot be said as a matter of law that no equitable relief may be awarded, as the SEC settlement may not provide all possible remedies, and the availability of further relief should be determined by the lower courts.
Court’s Reasoning
The Court of Appeals relied on evidence summarized in other decisions, including United States v. Ferguson, to conclude that sufficient evidence existed to raise a factual question regarding Greenberg’s and Smith’s participation in the fraud. The Court emphasized that credibility determinations are the province of the fact finder. Regarding equitable relief, the Court rejected Greenberg’s and Smith’s argument that the SEC settlement precluded any further equitable remedies. The Attorney General sought additional relief, including bans on participation in the securities industry and serving as officers or directors of public companies. While the Court acknowledged potential arguments against such broad lifetime bans, it held that the lower courts should determine the availability and appropriateness of any further equitable relief in the first instance. The Court stated, “[T]hat 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.”