95 A.D.3d 474
N.Y. App. Div.2012Background
- AG sued AIG, Greenberg, and Smith for Martin Act and Executive Law violations based on GenRe and CAPCO transactions.
- GenRe loss-reserve transfer allegedly had no risk transfer, was recorded as reserves, and involved side deals and $5M fee.
- CAPCO reinsurance allegedly converted underwriting losses into capital losses through offshore structuring.
- AIG restated 2000–2004 financials in 2005; Greenberg and Smith resigned; PwC and PwC auditors were involved.
- Post-2005 investigations, criminal trials led to convictions and later reversals; credibility issues affected evidence.
- Securities class actions paralleled with federal actions seeking damages for private investors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NYAG claims are preempted by federal law | NYAG action preempted under SLUSA/NSMIA/PSLRA | SLUSA/NSMIA preemption applies; state claims barred | No preemption; state actions allowed under NSMIA and related precedent |
| GenRe transaction liability under Martin Act | Defendants participated or knew of fraudulent no-risk structure | No admissible evidence of fraud; mere participation insufficient | Issues of fact exist; summary judgment denied for GenRe claim |
| CAPCO transaction materiality and intent under Martin Act | CAPCO was fraudulent with deceptive purpose | Record shows professional structuring; materiality disputed | Summary judgment on liability for CAPCO granted; materiality triable for CAPCO |
| Whether evidence used to support GenRe/ CAPCO claims was admissible | Evidence admissible per CPLR 3212 and prior Martin Act interviews | Evidence, including Hartford trial material, inadmissible hearsay | Admissibility issues shaped analysis; admissibility not dispositive for CAPCO. |
Key Cases Cited
- Kircher v. Putnam Funds Trust, 547 U.S. 633 (U.S. 2006) (SLUSA precludes state-law securities class actions for covered securities)
- Merrill Lynch v. Dabit, 547 U.S. 71 (U.S. 2006) (national uniform standards for securities class actions)
- Guice v. Charles Schwab & Co., 89 N.Y.2d 31 (1996) (state fraud policing aids federal objectives; preemption concerns)