Former AIG honcho Hank Greenberg may be 92, but he’s not giving up until Wall Street is finally free of those pesky regulators and their nit-picking over “widespread fraud.” The insurance man, who now heads C.V. Starr & Company, is pushing a new law sponsored by another former AIG executive, New Jersey Rep. Tom MacArthur, that would kill the famous Martin Act, the New York securities law that predates federal regulation, and all other local securities laws. Instead, state regulators would be stripped of the power to enforce securities laws civilly and allowed to pursue criminal prosecution only if they “comply in all respects with the legal requirements for securities fraud under federal law,” a fancy way of saying “they can no longer pursue criminal violations either.”
This is certainly of interest to Greenberg, who still harbors curious theories about who bears responsibility for his legal woes:
“Eliot Spitzer decided he wanted to take me down,” he said. “He was successful. Destroyed a company that had a $180 billion market cap. Now it’s what? A fraction of that. There’s been seven C.E.O.s since I left the company. Destroyed a great asset.”
Well, Spitzer didn’t do that so much as your management forcing the company to restate earnings to the tune of $3 billion did that, but whatever. If Hank wants to think he got f**ked Ashley Dupre-style, he may want to remember that he’s admitted that he “initiated, participated in and approved” the transactions that “inaccurately portrayed the accounting, and thus the financial condition and performance for A.I.G.’s loss reserves and underwriting income.” He now claims he just settled out of convenience and didn’t mean that, which is an unorthodox take on a quasi-allocution.
Personal issues aside, on paper, Greenberg’s complaint, backed by the U.S. Chamber of Commerce, appears reasonable. A patchwork of legal regimes rarely serves the interests of either the economy or the consumer, both of which find comfort in consistency. On the other hand, the effort to strip New York of its long-standing authority in this area owes more to Greenberg and the Chamber’s interest in keeping all the securities fraud eggs in one easily lobbied basket. When there’s only one revolving door to worry about, it’s a lot easier to push the envelope on Wall Street — even if those risks ultimately get shouldered by the American people.
Greenberg’s largely unconcerned about providing a legal remedy when financial misconduct harms regular folks.
One feature of the Martin Act is that it does not require the state to prove that someone actually intended to defraud people, a lower bar than what is required at the federal level.
“It’s outrageous,” Mr. Greenberg said of the intent issue. Asked if legislation broadly targeting all states was an appropriate remedy, he replied: “So is it better to have a law that violates every principle? Is that better? You can be tried for something without having to prove intent? Are we a third world country?”
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No, third world countries don’t prosecute the rich and powerful. New York’s nearly century-old Martin Act is one of those hallmarks of a first world nation, actually.
He’s also playing some fancy semantics when he rails against about being “tried.” Greenberg’s complaint is rooted in the dragged out civil litigation he faced, but he’s working hard to leave the impression that the Martin Act’s putting people in jail without a showing of intent. When understood in context, there’s a clear, reasonable purpose for a law that seeks restitution for victims of financial frauds that emerge from foolish hubris rather than deliberate fraud.
Despite what some diehard Occupy-ers might think, the financial sector rarely sets out to bankrupt the country, they just get cocky and ruining people’s hopes and dreams is just a perk.
Mr. Schneiderman, the attorney general who settled the case, said Mr. Greenberg’s case was “very straightforward,” noting that A.I.G. had restated the transactions on its books.
Regarding the legislation, he added, “I don’t know anyone who is saying we should have less regulation of securities fraud.”
Well, then he’ll be absolutely gobsmacked by Hank’s latest project.
Wall Street titan takes aim at law that tripped him up [CNBC]
Joe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.