Ex-AIG head Greenberg seeks removal of judge from case

NEW YORK—Lawyers for former American International Group Inc. Chairman and CEO Maurice R. Greenberg and Chief Financial Officer Howard I. Smith are seeking to remove the presiding judge in a civil case against them, arguing that the judge is biased.

The case, which is scheduled to go to trial in May, stems from former New York Attorney General Eliot Spitzer's 2005 lawsuit arising out of an investigation into the insurer's accounting practices. After AIG agreed the next year to pay $1.6 billion in damages and penalties, some allegations in the case were dropped.

But prosecutors pushed ahead with charges that Messrs. Greenberg and Smith had roles in the alleged improper use of a Barbados-based shell company, Capco Reinsurance Co. Ltd., and in inflating AIG's reserves using a sham finite insurance deal with General Re Corp.

In October, Justice Charles E. Ramos ruled in a summary judgment that the executives were liable for the Capco fraud, but he also said the question of how much they owe in damages should be resolved at a separate hearing. In addition, he allowed for a trial on the Gen Re matter.

The defense is appealing the Capco ruling.

But in their motions submitted to the judge on Wednesday, defense lawyers argued that Judge Ramos should recuse himself because of bias. For example, they cited comments the judge made expressing premature conclusions, such as his describing the New York attorney general's case as “devastating,” even though the defense said it is based on “overwhelmingly” inadmissible evidence. The defense also argues that the court improperly relied on findings from the trial of former Gen Re CEO Ronald Ferguson and other executives, whose criminal convictions in connection with the Gen Re-AIG deal are being appealed.

Messrs. Greenberg and Smith also have requested a jury trial, but prosecutors asked that the judge decide the case. However, the “mere possibility” that Judge Ramos might be responsible for evaluating the facts of Messrs. Greenberg and Smith's case makes his removal “even more critical,” defense lawyers said.

David Ellenhorn, senior trial counsel in New York Attorney General Eric Schneiderman's office, noted in court documents that the defense never said the court was biased during earlier motions and hearings in a case that has been pending for nearly six years.

In addition, he said the defense is trying to delay the case and noted that the court “bent over backwards to avoid entering a decision holding defendants personally liable for the Gen Re matter even though there was…indeed devastating evidence.”