Exclusive: Gov’t Attorneys Pulled Greenberg on Testimony Concerns

Justice Department attorneys abruptly erased former (NYSE:AIG) CEO Maurice “Hank” Greenberg -- a central figure in the case -- from its Starr v. U.S. witness list on concerns Greenberg’s testimony might possibly erode their defense.

Sources close to the matter tell the FOX Business Network that government attorneys in the $40 billion taxpayer-funded bailout lawsuit were weighing the benefits of putting Greenberg on the stand when they decided to pull him. The concern, these sources say, was that when cross-examined by his own attorney David Boies, Greenberg might be given a chance to articulate what he has maintained was a private -- not taxpayer-funded -- solution to the AIG liquidity crisis.

The trial now in its eighth week centers on Greenberg’s assertion that the government unconstitutionally seized equity in the faltering insurance giant during the 2008 bailout, imposed onerous interest rates as high as 12% on AIG for political reasons, and in turn, Greenberg alleges, destroyed billions in shareholder value.

Sources tell FOX Business that Justice Department attorneys were focused on the potential that the 89-year-old insurance executive would testify that he tried “multiple times” during the financial crisis to reach former Treasury Secretary Henry Paulson and Timothy Geithner, who was then head of the New York Federal Reserve, to offer private solutions to AIG’s liquidity problem.

If Greenberg were to have taken the stand in Federal Claims Court, he would have likely been asked to specifically outline what type of private market solutions he had at the ready as the insurance giant faced a massive liquidity crunch during the financial crisis. Sources said government attorneys would have tried to highlight holes in Greenberg’s assertion that he had the ability on short notice to cobble together a private equity bailout with the help of foreign sovereign wealth funds that included China and Singapore.

The government was also expected to press him on the validity and timeliness of his private bailout solutions. Concerns swirled at the time of the bailout that if AIG were to fail, it would systemically harm Goldman Sachs and other banks whose major investments in certain derivatives were insured by AIG.

However, last week shortly after FOX Business reported  on potential strategies for both sides, the Justice Department removed Greenberg from its witness list. A spokesperson told FOX Business late Friday that Greenberg would not be on the witness list this week either.

Government lawyers are expected to rest their case as soon as Friday. Sources say presiding Judge Thomas Wheeler is expected to set a date for closing arguments shortly thereafter. A written opinion in the case may come during the first quarter of 2015.

The Justice Department and Greenberg’s attorney David Boies declined to comment on the case.