Ex-AIG chief Greenberg seeks dismissal of case against him NEW YORK (Reuters) - New York's highest court will hear arguments on Tuesday on whether to dismiss a lawsuit accusing Hank Greenberg of orchestrating sham transactions when he was head of insurance company American International Group Inc. New York Attorney General Eric Schneiderman dropped damages claims in the case last month, but he is still trying to have Greenberg, 88, banned from the securities industry and from being a director or officer of a public company. David Boies, a prominent lawyer who represents Greenberg, said he would argue at Tuesday's hearing for a dismissal of the lawsuit. "The case is over," Boies told Reuters on Friday. Schneiderman disagreed. "Three consecutive attorneys general have pursued this case," said his spokesman, Damien Lavera. Justice demands personal accountability for people who commit fraud, no matter how rich or well-connected they may be. Eliot Spitzer, the New York attorney general at the time, brought the lawsuit in 2005. Andrew Cuomo, Spitzer's successor and now New York's governor, later oversaw the case. It centers on two transactions in which AIG misled its shareholders. One, with General Re Corp, a unit of Warren Buffett's Berkshire Hathaway Inc, raised AIG's loss reserves by $500 million without transferring risk. Another, with Capco Reinsurance Co, hid a $210 million underwriting loss in an auto-warranty program. At Tuesday's hearing, New York's Court of Appeals will hear Greenberg's effort to reverse lower court rulings that allowed the case against him and former AIG Chief Financial Officer Howard Smith to go forward. The appeal originally included a much-anticipated challenge to New York's Martin Act, the 1921 securities fraud statute that attorneys general Spitzer, Cuomo and Schneiderman have wielded against Wall Street since the early 2000s. Boies was set to argue that the state attorney general lacks authority to recover damages on behalf of private entities. Those arguments became moot on April 25, when Schneiderman dropped his damages claims against Greenberg and Smith. "I'm disappointed, but I'm not going to complain," Boies said on Friday. I think the Martin Act issue is an important issue. Regarding the state's remaining claim, Boies said he would tell the judges that the state could not seek injunctive relief now because it did not push for it in the lower courts. "They have now abandoned the only claim they made in the trial court, which was a claim for damages," Boies said. Their attempt to keep the case alive by adding a new claim for injunctive relief should fail. He said he might also argue that the state had wrongly relied on hearsay evidence to support the Gen Re claim. "There is no admissible evidence ... of any knowledge or participation by Mr. Greenberg or Mr. Smith in the activity that is alleged to be improper," Boies said. Solicitor General Barbara Underwood, who will present the attorney general's case on Tuesday, is expected to argue that the state is not making a new claim and that the trial should proceed. In court papers, the state has said Greenberg "initiated, negotiated and approved" the transaction with Gen Re "with knowledge of its fraudulent terms." Smith helped implement the deal and also knew of the sham, the state said. A seven-member panel of the court will hear the arguments in Albany. A decision could come in June. Spitzer, who went on to become New York governor before resigning in 2008, applauded Schneiderman's resolve in bringing the case to trial. "Money is no longer what matters in this litigation," he told Reuters. What is critical is the historical record be set out with accuracy. Former New York governors George Pataki and Mario Cuomo, Andrew Cuomo's father, said in a joint op-ed piece published in the Wall Street Journal on May 12 that Schneiderman should drop the case. The transaction with General Re led to five convictions of and two guilty pleas from former officials of the companies. A federal appeals court overturned the convictions in 2011, citing errors by the trial judge. The five entered into deferred prosecution agreements. As part of the deals, all five agreed that aspects of the transaction were fraudulent and that they should have taken steps to stop it. Buffett was not accused of wrongdoing. Greenberg left New York-based AIG in March 2005 after nearly four decades at the insurer's helm. After his ouster, AIG paid $1.6 billion to settle regulators' claims of improper accounting and other practices. AIG also restated financial results for several years. The case is People v. Maurice R. Greenberg, New York State Supreme Court, New York County No. Reporting by Karen Freifeld; Editing by Eddie Evans and Lisa Von Ahn