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Charlie Breaks It

Free Flight Raises Questions in AIG Case

By Charlie Breaks ItFOXBusiness

The New York state lawyer leading a high-profile civil case against former American International Group (NYSE:AIG) chairman Hank Greenberg took a free, previously undisclosed private jet ride from one of Greenberg’s attorneys -- sparking the latest battle between New York Attorney General Eric Schneiderman and the former AIG chief and even causing friction among members of the Greenberg legal team.

The bizarre series of events stemmed from a 2009 deposition of Berkshire Hathaway chief Warren Buffett involving a transaction between a subsidiary of Buffett’s company and AIG. The transaction is at the heart of the civil case against Greenberg, initially filed in 2005 by former New York Attorney General Eliot Spitzer.

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After the deposition, David Boies says he offered assistant attorney general David Ellenhorn a ride back to New York on his private jet, accompanied by a half dozen other Greenberg lawyers. Ellenhorn was the only state attorney on the plane; another assistant attorney general on the case flew back commercial, a lawyer for Greenberg says.

Boies, in a statement to Fox Business, said: “Four years ago, I offered a seat on my personal aircraft to David Ellenhorn for a single trip, so he could get home to New York following a deposition. Since I was already flying back, there was no additional cost to me and the seat had no financial value. The trip was neither paid for nor endorsed by any client of mine, Maurice Greenberg included…I do not believe there was any misconduct on Mr. Ellenhorn's part in accepting the ride I offered.”

Not quite, say other lawyers working for Greenberg, who this weekend openly criticized Boies’s assessment of the event. Arthur Schwartz, a senior counsel for Greenberg, told Fox Business that the plane ride violates New York State’s Public Officer’s Law, which he says prohibits state employees from taking gifts “intended to influence him or her.”

David Grandeau, the former executive director of the New York State Lobbying Commission, and a lawyer now for Greenberg, said: “The Public Officers Law is clear that not only was it highly inappropriate for Mr. Ellenhorn to fail to disclose and or pay for hitching a ride on the private jet but it was a clear violation to accept the ride in the first place. There isn't a single state employee that wouldn't know it was wrong to get on that plane.”

But the law also “prohibits any person from directly or indirectly offering or making such a gift to a State officer or employee. Thus, it is applicable both to a donor and a donee.”

In a telephone interview, Boies, a high-profile lawyer who represented former Vice President Al Gore in the disputed 2000 presidential election, told Fox business “I didn’t think there was anything wrong with me offering him a ride or him taking it.”

Boies added that the Buffett deposition, which took place in Buffett’s hometown in  Omaha, Nebraska, “went longer than people thought it would. My understanding is that he (Ellenhorn) missed his plane, and I said ‘I've got a plane to give you a ride back’” to New York.

“The issue about what was he supposed to disclose or reimburse, I don’t have any  information on. That’s an internal New York Attorney General issue,” Boies added.

A spokesman for Schneiderman’s office confirmed that Ellenhorn took the plane ride,  but wouldn’t say whether it was legal.

“No one is above the law, no matter how rich or powerful, and that is why three  consecutive attorneys general have sought for nearly a decade to hold Hank Greenberg responsible for his role in a massive fraud,” Schneiderman spokesman Damien Lavera said in a statement. He added that Greenberg “has tried to evade responsibility through delay and by attacking his prosecutors. This is just the latest blatant effort to distract from the facts of the case, unworthy of a response, other than to say that Attorney General Schneiderman will not be deterred from seeking justice in this matter.”

Ellenhorn, through a spokesman, declined to comment.

Greenberg resigned from AIG in 2005, after Spitzer sued the firm and Greenberg for civil  securities fraud alleging that the transaction was designed to inflate AIG’s earnings. Without admitting wrongdoing, AIG paid a massive fine to resolve the issue; without Greenberg at the helm, the insurer would eventually fall into disarray and need a massive federal bailout during the 2008 financial crisis.

All along Greenberg has maintained his innocence and in the years since he has managed  to get the vast majority of the original charges thrown out of court.

Though only two counts of the original case remains, Schneiderman is seeking to ban  Greenberg, 88, from the securities business.

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