NEW YORK (Reuters)—New York state prosecutors have "a devastating case" against former American International Group Inc. CEO Maurice R. Greenberg, whom they accuse of fraud over a reinsurance transaction 10 years ago, the presiding judge said in court on Tuesday.

During oral arguments, New York State Supreme Court Justice Charles Ramos did not rule on Mr. Greenberg's motion last week to dismiss the case or the office of New York Attorney General Andrew Cuomo's request for summary judgment.

Mr. Greenberg's attorney, David Boies, argued that much of the attorney general's case relies on hearsay disputed evidence regarding two conversations the former AIG chief had with onetime General Re Corp. CEO Ronald Ferguson that purportedly sealed the deal.

The judge told Mr. Boies that David Ellenhorn, a lawyer in the attorney general's office, "has put together a devastating case, a very strong case, and we both know it. I am very, very much focused on those two conversations Mr. Greenberg had with Mr. Ferguson."

Brought in 2005 by former Attorney General Eliot Spitzer, the case involves a 2000 reinsurance transaction with General Re, a unit of Warren Buffett's Berkshire Hathaway Inc., that boosted AIG's loss reserves by $500 million without transferring risk.

"This transaction is material because it was designed to, and did in fact, mislead investors about AIG's reserves," Mr. Ellenhorn told the court.

He said that when he deposed Mr. Greenberg two weeks ago, 90% of his answers were "I don't know," despite the now-84-year-old Mr. Greenberg's fame for knowledge and attention to detail.

"He drills down so deep, to the Arctic ice, and yet he tells us he doesn't know the details of what he discussed with Ferguson," Mr. Ellenhorn said. "It's ridiculous."

Mr. Greenberg is trying to rehabilitate his reputation and settle lawsuits over the transaction and his ouster from AIG in March 2005.

Former AIG Chief Financial Officer Howard Smith also was charged in the civil lawsuit, which seeks to hold the two former executives of the giant insurer liable under New York's powerful securities law, the Martin Act.

Federal prosecutors have obtained five criminal convictions and two guilty pleas of former General Re and AIG officials over the transaction, including a conviction of Mr. Ferguson.

Last August, Mr. Greenberg agreed to pay $15 million to settle U.S. Securities and Exchange Commission charges that he altered AIG's records to boost results between 2000 and 2005.

Three months later, Mr. Greenberg and AIG resolved years of litigation that followed his exit. AIG agreed to reimburse him and others for as much as $150 million of legal expenses.

Investigators have questioned Mr. Buffett about the General Re transaction. The billionaire was never accused of wrongdoing.

The case is New York vs. Greenberg et al., New York State Supreme Court, New York County, No. 401720/2005.