Greenberg v. Spitzer

The following papers, numbered 1 to 119, were considered in connection with these motions: PAPERS NUMBERED Notice of Motion/Affidavit of Spitzer in Support/Exs. A-E                1-7 Affirmation of Brown in Support (5/22/18)/Exs. F-I      8-12* Affirmation of Sullivan in Support (5/22/18)/Exs. J-EE  13-40* Second Affirmation of Sullivan in Support/Exs. FF-KK   41-47 Memorandum of Law in Support                  48 Affirmation of Dwyer in Opposition/Exs. 1-67                49-117 Memorandum of Law in Opposition             118 Memorandum of Law in Reply   119 * The submissions, dated May 22, 2018, were made in connection with Defendant’s original motion for Summary Judgment. DECISION & ORDER INTRODUCTION   Upon completion of discovery in this defamation action, Defendant moves for summary judgment, dismissing Plaintiff’s Amended Complaint on the basis that Plaintiff cannot prove Defendant acted with actual malice by clear and convincing evidence. Plaintiff naturally opposes such relief and asserts that factual issues are present requiring a trial. At issue are seven statements made by Defendant, some as brief as three or four seconds, in a 17-minute segment of a cable television news/opinion show. In that segment, the discussion covered a number of events that occurred over a 12-year time span and involved numerous judicial proceedings. Under such circumstances, specific pieces of information yielded a conflation of events, statements, and issues. The alleged defamatory statements, set forth in Exhibit 1, must be viewed in this broad context. FACTS This action involves two prominent public figures who have engaged in judicial and media battles for more than a decade. Each is outspoken and direct. Each has sought to rebuild his public stature after setbacks. In these respects, they may be more alike than different. Plaintiff Maurice R. Greenberg (“Greenberg”), the former Chairman and Chief Executive Officer (“CEO”) of American International Group, Inc. (“AIG”), a multinational insurance firm, brings this defamation action against Defendant Eliot L. Spitzer (“Spitzer”), New York State’s former Governor and Attorney General, in response to a series of public statements Spitzer made in relation to Greenberg’s tenure at, and management of, AIG. Greenberg’s Amended Complaint alleges that Spitzer made defamatory statements on two occasions — July 13, 2012 and republished on July 16, 2012. Greenberg also alleges that Spitzer’s book, “Protecting Capitalism Case by Case” (“Protecting Capitalism”), contains defamatory statements. Plaintiff commenced this defamation action on July 12, 2013, immediately before the statute of limitations expired on the first statement. The events that are the subject of the allegations concerning AIG took place years earlier, between 2000 and 2005, when Defendant, as New York Attorney General, pursued claims against financial services industry members, such as banks, brokerage firms, and others, which included AIG. In certain instances, the claims gave rise to overlapping judicial proceedings in state and federal courts, as well as administrative enforcement actions, involving the Securities and Exchange Commission (“SEC”). During this period, the media had nicknamed Defendant, “The Sheriff of Wall Street.” Not surprisingly, his efforts found supporters and detractors. The national economy crashed in 2008-2009, followed by a lengthy economic recession. Demonstrations in the form of an “Occupy Wall Street Movement” took place, promoting an end to economic inequality and injustice at the hands of the world’s financial giants. Responsibility, or blame, for the nation’s economic woes was the subject of numerous discussions in print and electronic media, as well as in local and national political campaigns. In October 2004, Attorney General Spitzer announced that his Office was investigating fraud and anti-competitive practices in the insurance industry. In this climate, Plaintiff and Defendant clashed. Greenberg opposed regulatory efforts, especially when he believed any transgressions were minor and the penalties were severe. Spitzer believed in greater enforcement, especially where he believed the federal government was inadequately addressing corporate behavior in the financial markets. Their dispute would extend beyond the present action, cutting a swath across the state and federal courts as AIG was part of investigations and lawsuits filed by the SEC, the United States Department of Justice (“DOJ”), and the Office of the New York Attorney General (“NYAG”).¹ Their dispute would continue in the ensuing years, either directly or through surrogates in the media, including, but not limited to, Wall Street Journal editorials, op-ed pieces, and Defendant’s replies. In the wake of the 2008-2009 economic crash, there were general, public discussion about the economic relief provided to Wall Street institutions. Some criticized the “bailouts”; others claimed that the institutions were “too big to fail.” These media slogans gloss over a more fundamental discussion about national economic policy, which has been debated for more than a century; namely, whether government regulation should regulate financial markets and entities more forcefully, or whether regulation should not interfere with the economic engine that drives the Nation. Greenberg and Spitzer held different views on these issues with Spitzer favoring more regulation and accountability, and Greenberg favoring less. Unsurprisingly, this philosophical clash continued in public discussions, especially after the Nation’s treasury was used to rescue Wall Street institutions, such as AIG and Goldman Sachs. Executives received tens of millions of dollars in bonuses from those bailout funds, while simultaneously, many Americans suffered in the economic downturn. Clearly, the Nation’s business and financial leaders’ conduct, and its impact on the economy, are matters of the highest public concern, and speech that is critical — or supportive — of those matters is protected within “the constitutionally protected area of free discussion” (Rosenblatt v. Baer, 383 US 75, 85 [1966]). An analysis of the challenged statements begins with the broad context of events that date from 2000 until the 2012 interview. To some degree, both parties and their witnesses rely on memories that have become fallible with age. At least one witness, Steven Bensinger, freely acknowledged it, “[M]y memory regarding these events has faded…I have provided this information to the best of my recollection given the substantial amount of time that has passed” (Ex. 54 at 2). Other witnesses have executed affidavits, recounting events from many years before the facts they alleged. The ability to accurately recall, and relate, events years later when they testified or affirmed likely affected other witnesses. The volume of documents may or may not stimulate accurate recollections. In addition, a crucial part of the Court’s defamation analysis is Defendant’s state of mind at the time of publication in 2012, and not in 2000, or 2004, or 2009 (Curtis Pub. Co. v. Butts, 388 US 130 [1967]; Kipper v. NYP Holdings Co., Inc., 12 NY3d 348, 354-355 [2009]). THE GEN RE TRANSACTION² On October 26, 2000, AIG announced a 59 million dollar decrease in loss reserves for its third quarter. The size of the loss caught industry analysts’ and financial executives’ attention, especially as AIG’s stock value dropped. Plaintiff was concerned and recognized the need to boost, and the importance of boosting, AIG’s loss reserves. On October 31, 2000, he telephoned Ronald Ferguson, CEO of General Reinsurance Corporation (“Gen Re”), to create a transaction where AIG could increase its loss reserves without additional risk to AIG.³ The deal, known as a Loss Portfolio Transfer (“LPT”), did not benefit Gen Re, and as it unfolded, it took on some strange features. These included: 1. The transaction contained no risk for AIG, in contrast to the permissible amount of minimal risk. 2. A deceptive offer letter intentionally designed to make it seem as if Gen Re solicited the deal rather than AIG. 3. A separate, simultaneous side deal in which AIG paid Gen Re five million dollars to undertake the loan and AIG also repaid ten million dollars in premiums paid by Gen Re. 4. The payments would be made through subsidiaries so as to appear unrelated. 5. AIG would boost its loss reserves by 500 million dollars without showing any additional risk on its books, a fact that enabled AIG to publicize the growth in loss reserves. The absence of risk conflicts with Financial Accounting Standards (“FAS”) 113. 6. Each party structured the deal for accounting purposes in an asymmetrical manner to avoid “reporting problems” or the scrutiny of regulators. 7. Loss reserves in such transactions are usually determined by a detailed actuarial analysis after the fact; instead, the parties asserted a pre-ordained specific amount of loss reserves without any actuarial analysis (because the absence of risk had been agreed upon and made the actuarial analysis unnecessary). 8. Gen Re made no claims, and AIG paid no claims. 9. The transaction was premised on strict confidentiality. The terms were negotiated by persons chosen by Greenberg and Ferguson to “iron out” the details they discussed. Greenberg designated Christian Milton, a Senior Vice-President at AIG and head of reinsurance.⁴ In mid-November, Greenberg and Ferguson spoke again, presumably to confirm the transaction’s terms. The transaction was completed, and, as AIG’s reserves increased, Greenberg basked in favorable reviews. The basic problem with the transaction, as Justice Ramos described it, was that it failed to comply with Generally Accepted Accounting Principles (“GAAP”)⁵ accounting rules set forth in the Statement of Financial Standards (“FAS 113″). The failure to qualify as reinsurance arose from the lack, or absence, of risk transferred. In the absence of significant risk transferred, the transaction must be booked as a deposit, not insurance. AIG’s problem was that booking the transaction as a deposit would not affect loss reserves (People ex rel. Cuomo v. Greenberg, 2010 NY Slip Op 33216[U], *12). Several years later, in February 2005, upon learning of the peculiar aspects of the transaction, the SEC and the NYAG each served subpoenas on AIG (Ex. 12).⁶ After February 9, 2005, “Greenberg became aware that each of AIG and AIG’s Audit Committee was investigating AIG’s accounting with respect to certain transactions and…included examination of Mr. Greenberg’s actions with respect to specific transactions” (Ex. DD at Plaintiff’s Response to Interrogatory #2, January 5, 2018). In response to the subpoenas, AIG retained the law firm of Paul Weiss Rifkind Wharton and Garrison (“Paul Weiss”) to conduct an internal investigation into the Gen Re transaction, and requested that Price Waterhouse Coopers (“PwC”) conduct an expanded audit. According to Justice Ramos, during that expanded audit, “Greenberg, in an ‘argumentative tone’ tried to convince [auditor Barry Winograd] to ignore or downplay the deal, suggesting that it was ‘much ado about nothing’” (2010 NY Slip Op 33216[U], *6). Barely one month later, in March 2005, AIG issued a press release having concluded the “Gen Re transaction documentation was improper and, in light of the lack of evidence of risk transfer, these transactions should not have been recorded as insurance” (Ex. V, Complaint at 35) (People ex re. Cuomo v. Greenberg, 2010 NY Slip Op 33216[U], *15). CAPCO The CAPCO transaction involved AIG’s attempts to hide 200 million dollars in underwriting losses it incurred in an auto warranty insurance program. The size of the losses made reinsurance unlikely. Instead, AIG undertook a plan to convert underwriting losses into capital losses, a less-significant measure of financial performance. Joseph Umansky, an AIG Senior Vice-President, was tasked with implementing the plan. Having learned that Western General Insurance Ltd. (“West Gen”), a business ally of AIG, planned to liquidate a subsidiary, CAPCO Reinsurance Company (“CAPCO”), Umansky asked West Gen to sell CAPCO to AIG. West Gen purchased one million dollars worth of CAPCO common stock while AIG made a “market value adjustment” of one million thirty thousand dollars for the consummation of a separate reinsurance treaty between AIG and West Gen. At Greenberg’s urging, Umansky arranged for investors to purchase the remainder of CAPCO common stock. American International Reinsurance Company (“AIRCO”), an AIG subsidiary, purchased 170 million dollars of CAPCO preferred stock. CAPCO agreed to reinsure National Union, another AIG subsidiary, as lead for the auto warranty pool in AIG’s auto warranty business. The investors’ equity interest in CAPCO was entirely financed on a non-recourse basis by another AIG subsidiary, AIG Capital Corporation, pursuant to a Promissory Note. The investors never made a payment to AIG on the notes. They did not have to. Rather, AIG agreed to pay them 100 thousand dollars in “consulting fees,” payable in proportion to their ownership of CAPCO common stock. By agreement, CAPCO was prohibited from engaging in any business other than reinsuring National Union. Bluntly, AIG pumped enough into CAPCO through AIRCO’s purchase of CAPCO preferred stock in order to cover AIG’s projected underwriting loss, which CAPCO “reinsured” for a nominal premium. AIG’s funding amounted to 89 percent of CAPCO’s capitalization without which CAPCO would have had insufficient assets to pay the loss it reinsured. With each claim CAPCO paid under the reinsurance agreement, AIG reported an underwriting gain that offset the auto warranty underwriting losses CAPCO assumed. AIG sold its interest in CAPCO, leaving it a shell company with underwriting losses and AIG with purported capital losses. According to Justice Ramos, upon learning of the structure and purpose of the CAPCO transaction, Barry Winograd, PwC’s Global Engagement Partner for AIG’s 2002-2004 audit years, called it “one of the sleaziest” (2010 NY Slip Op 3316[U], *11). The NYAG alleged the entire deal lacked economic substance, and served to conceal AIG’s underwriting losses in the auto warranty program by converting the underwriting losses into investment losses which analysts and stock market investors would perceive as less serious (Ex. 27 at