Opinion
800004/2018
11-12-2020
Maurice R. GREENBERG, Plaintiff, v. Eliot L. SPITZER, Defendant.
Robert J. Dwyer, Esq., Boies Schiller Flexner, LLP, Attorneys for Plaintiff, 575 Lexington Avenue, New York, New York 10022 and John L. Gardiner, Esq., Skadden, Arps, Slate, Meagher & Flom, LLP, Attorneys for Plaintiff, Four Times Square, New York, New York 10036 Jay Ward Brown, Esq., Attorney for Defendant, 1675 Broadway, 19th floor, New York, New York 10019
Robert J. Dwyer, Esq., Boies Schiller Flexner, LLP, Attorneys for Plaintiff, 575 Lexington Avenue, New York, New York 10022 and
John L. Gardiner, Esq., Skadden, Arps, Slate, Meagher & Flom, LLP, Attorneys for Plaintiff, Four Times Square, New York, New York 10036
Jay Ward Brown, Esq., Attorney for Defendant, 1675 Broadway, 19th floor, New York, New York 10019
Victor G. Grossman, J.
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.
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"). 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 discussions 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] ).
The litigation has been pending in one form or another for 15 years, with both sides utilizing armies of lawyers, experts, public relations personnel, and others. In this action alone, pre-trial discovery expenses exceed $250,000.00. In his book, "The AIG Story," Plaintiff asserts that more than one billion dollars in legal fees were spent in a five-year period (presumably exclusive of the present action which was commenced at about the time of publication) (Ex. T at xi, "Chairman's Note"). The number of lawyers involved is unknown, but 16 lawyers have participated in preparing the instant motion papers, as the parties slog toward their judicial Armageddon.
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 summaries of the Gen Re and CAPCO transactions are based on the Exhibits submitted and on the decisions in United States v. Ferguson , 553 F Supp 2d 145 (D Conn 2008), revd 676 F3d 260 (2d Cir 2011), and People ex rel. Spitzer v. Greenberg , 2010 NY Slip Op 33216(U) (Sup Ct, NY County 2010), affd as modified 95 AD3d 474 (1st Dept 2012), affd 21 NY3d 439 (2013).
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. 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:
This telephone call by Greenberg initiated a conspiracy "to artificially inflate AIG's loss reserves and deceive AIG's investors about the amount of the company's loss reserves and the quality of its earnings," according to the federal District Court in United States v. Ferguson (553 F Supp 2d at 158 ). In addition, in People ex rel. Spitzer v. Greenberg (2010 NY Slip Op 33216[U], *20-21), Hon. Charles Edward Ramos, JSC found "Greenberg...initiated the Gen Re transaction with Ferguson in two telephone conversations...," and "Greenberg was a participant and likely spearheaded an illicit arrangement between Gen Re and AIG to effectuate a transaction to artificially inflate AIG's loss reserves." Greenberg was not a party in Ferguson , although he was named as an unindicted co-conspirator. The convictions in Ferguson , including the conviction of an AIG employee, were reversed and vacated on other grounds (676 F3d 260 [2d Cir 2011] ). Notwithstanding the reversal, the Second Circuit upheld as not clearly erroneous the District Court's ruling that the conspiracy began on October 31, 2000 with Greenberg's telephone call (676 F3d at 289 ). In 2013, after the events in question here, the New York Court of Appeals held, "We have no difficulty in concluding that, in this civil case, there is evidence sufficient for trial that both Greenberg and [Howard] Smith participated in a fraud. The credibility of their denials is for a fact finder to decide" (People ex rel. Cuomo v. Greenberg , 21 NY3d at 447 ). In all prior proceedings, Greenberg has denied any wrongdoing.
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. 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 Court takes judicial notice of the fact that after the convictions were reversed in Ferguson , Milton entered into a Deferred Prosecution Agreement in which he agreed to pay a $200,000.00 fine. In the settlement, Milton stated that he "(1) recognizes that aspects of the LPT [Loss Portfolio Transfer] transaction were fraudulent; and (2) does not dispute that (a) the LPT transaction was highly unusual, (b) red flags suggested that the transaction would be improperly accounted for, which he disregarded, and (c) he should have attempted to stop it from going forward, but instead continued to participate in it" (United States v. Milton, 2012 WL 12303785 [D Conn, June 22, 2012, No. 3:06cr137 (VLB) ] ).
The basic problem with the transaction, as Justice Ramos described it, was that it failed to comply with Generally Accepted Accounting Principles ("GAAP") 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).
Generally Accepted Accounting Principles ("GAAP") refer to a common set of accounting principles, standards and procedures issued by the Financial Accounting Standards Board ("FASB"). FASB has the authority to establish and interpret GAAP in the United States for public and private companies. GAAP is a combination of authoritative standards and commonly-accepted ways of recording and reporting accounting information. GAAP's ultimate goal is to ensure financial statements are complete, consistent, and comparable, and to make it easier for investors to analyze and identify useful information from financial statements. Public companies must follow GAAP when compiling financial statements.
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). 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 No. 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).
The NYAG investigation began in 2004.
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% 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 ¶¶ 40-60).
GREENBERG'S DEPARTURE FROM AIG
After the subpoenas were served in February 2005 and prior to any enforcement action, AIG's Board of Directors met in mid-March 2005. The Board of Directors was faced with allegations of wrongdoing by their Chairman and Chief Executive Officer, and the subpoenas placed AIG in the cross-hairs of "The Sheriff of Wall Street." As the investigation unfolded, a third element came into play — AIG's auditor, PwC, would no longer certify the accuracy of the information provided by Greenberg (Ex. 53 at 101). This position reflected an abrupt change from PwC's position at the March 7, 2005 Audit Committee meeting (Ex. 52). Until June 2005, Winograd was the signing partner on the 10-K (Ex. 53). Winograd was concerned that the NYAG was investigating AIG, but acknowledged that "regulatory oversight and investigation were quite frequent" (Ex. 53 at 59). Notably, when asked if he had any concern about whether the NYAG investigation could create some risk for PwC, he responded, "In terms of a specific risk to the firm beyond the risks we kind of live with on every big audit, no" (Ex. 53 at 61). Winograd was aware of the press reports concerning Spitzer and the investigation, but he was "not impressed" with them (Ex. 53 at 59-61, 94-95). Still, without PwC's certification, AIG's very existence would be challenged. The ripple effect on other financial and insurance entities with which AIG dealt also was significant. Winograd had not reached any conclusion about the commission of accounting fraud in March 2005 as the investigations had not been completed. In response to a question about Greenberg's micromanaging of matters, Winograd viewed Greenberg as a "chief executive who is very hands-on and very interested in the details of the accounting stuff ... [H]e would call me from time to time and ask me about specific transactions or accounting matters on things that would affect accounting" (Ex. 53 at 205).
The Appellate Division, First Department also stated that Winograd "had frequent contact with Greenberg throughout the investigation and that Greenberg was particularly interested in PwC's findings with respect to Gen Re." Greenberg had similar involvement with the CAPCO transaction (People ex rel. Cuomo v. Greenberg , 95 AD3d at 477-478 ). According to Justice Ramos, Greenberg "personally" involved "himself in a matter usually delegated to others, which was highly unusual because, as Greenberg himself acknowledged he ‘didn't get involved in the day-to-day reinsurance of AIG’ " (2010 NY Slip Op 33216[U], *20). This hands-on, micromanaging contradicts the role and function of a Chief Executive Officer as described in the Affidavit of John C. Whitehead, former Co-Chairman of Goldman Sachs (Ex. 49 at ¶¶9, 21), as well as Written Direct Testimony of AIG Board Member Carla Hills ("Hills Affidavit") (Ex. 7 at ¶9[a], [d] ).
Greenberg blamed Spitzer for being overly zealous and heavy-handed for what he saw as minor matters. Greenberg also believed that Spitzer exerted pressure on the Board of Directors to discharge him. These issues were raised at a March 14, 2005 Board meeting. Prior to that meeting, Richard Beattie, counsel for the Independent Directors, called Spitzer at the request of Board members who wanted to know the status of the NYAG investigation. He had not previously spoken to Spitzer. Spitzer advised him that the NYAG "had a lot of damaging evidence" and "tapes that indicate[d] that Greenberg was involved in the planning of the [Gen Re] transaction" (Ex. 22 at 37). Spitzer and Beattie disagreed about whether Spitzer said he had Greenberg's voice on tape discussing the Gen Re transaction (Ex. 22 at 167-168, 253-254). Spitzer denied saying Greenberg's voice was on the tapes, and, in fact, he had not heard the tapes at the time he met Beattie (Ex. 2 at 56-60). According to Beattie, the Board meeting continued for several hours before he spoke about his conversation with Spitzer (Ex. HH at September 5, 2012 email). There was also a perceived threat that AIG would face criminal indictment that Board members felt meant the end of AIG as it was known, but the exact source of this concern was unclear. AIG Board Members William S. Cohen and Carla Hills expressed this concern (Ex. 56 at 78-80; Ex. 55 at 61-63, 149-150). Cohen "first became aware that PwC ha[d] objections to Gen Re and two others" on March 13, 2005 (Ex. 56 at 77). Cohen attributed the possibility of indictment to Beattie (Ex. 56 at 79-80), but Beattie testified that Spitzer never threatened criminal action against AIG or its Board of Directors if it did not fire Greenberg (Ex. 22 at 255; Ex. 63 at 74-78; Ex. 65). After the possibility of indictment was raised, with its potential impact on shareholder value, "the discussion evolved into talking about whether or not Mr. Greenberg needed to step down under the circumstances. And the discussion went on for seven, eight long hours during the course of that day" (Ex. 56 at 80). When asked if the discussion was "about the need for Mr. Greenberg to step down because of the threat of criminal indictment," Cohen responded, "As I recall [PwC] said they would not certify the results as long as Mr. Greenberg was CEO" (Ex. 56 at 81). But Cohen did not blame Spitzer's threats. Essentially, according to Cohen, if Greenberg was under threat of indictment, PwC would be in jeopardy since it had certified previous financial statements and "had a very strong interest in not being indicted as well" (Ex. 56 at 81). Cohen also acknowledged a very general discussion about the financial atmosphere at the time, including issues affecting WorldCom, Enron and [Arthur] Andersen (Ex. 56 at 80-81).
These tapes may have been part of a recording system used by Gen Re (see United States v. Ferguson , 553 F Supp 2d at 150 n. 1 ).
Greenberg contends Spitzer threatened to indict him. But even AIG's counsel confirmed to Justice Ramos at a hearing, "There is no question the regulators were threatening to indict AIG [not Greenberg]" (Ex. 45 at 10:10-12). The threats included Spitzer's statement on "This Week" on April 10, 2005 (Ex. 46 at 10:51:23) ("It could be criminal."), and summoning AIG witnesses before a grand jury as late as mid-May 2005 (Ex. 47), days before the Restatement was issued. Spitzer admitted that "he raised the possibility of filing criminal charges against AIG" (Ex. 3 at No. 40). As Spitzer boasted: "AIG settled the case with my office in 2006 by restating its financials, paying a fine of $1.6 billion - at the time, the largest in history - and separately, by removing Greenberg as CEO" (Exs. 26, 48). And he said on "Closing Bell," "we charged the company , cleaned it up, got new leadership" (Ex. 15 at 12:5-7).
Spitzer also threatened anyone who publicly defended Greenberg. After John Whitehead, former Co-Chairman of Goldman Sachs, publicly defended Greenberg (Ex. 49 at ¶¶28-37, Ex. A thereto), Spitzer called Whitehead and screamed that he would "pay dearly" because "It's now a war and you've fired the first shot. I will be coming after you. You will pay the price" (Ex. 49 at ¶¶38-49; Ex. 50 at ¶7-8, Ex. A thereto; Ex. 51 at 17:18-21). According to Plaintiff, such threats against Greenberg's defenders are additional evidence of actual malice (Hachmann v County of Nassau , 29 AD3d 952, 953 [2d Dept 2006] ) (Memorandum in Opposition at 18, n 21).
Greenberg also claims Spitzer threatened to indict AIG for obstruction of justice arising from the removal and possible destruction of AIG files in a Bermuda office that AIG shared with other allied entities, Starr International Company ("SICO") and/or C.V. Starr & Company ("C.V. Starr") (Ex. 11 at 238-241; Ex. 22 at 70; Ex. 57 at 367-368; Ex. 63 at 74-88; Ex. 66; Ex. T at 189-190; Ex. U at 49). The incident occurred in late March 2005, and generated a series of telephone calls among counsel before the documents were secured and the impasse was resolved. The Exhibits suggest that the removal and destruction of records were done with the knowledge of Greenberg's personal attorney, David Boies, and were carried out by employees of AIG and Starr International. Within days of these events and Spitzer's reaction, Greenberg resigned as Chairman of AIG (Ex. 60).
Hills was asked, "Did Mr. Beattie say that Mr. Spitzer had threatened to [indict AIG] unless Greenberg was discharged? Did he ever say anything like that on March 13th?" (Ex. 55 at 62). Her answer was equivocal — "I believe that there was a discussion that Mr. Greenberg staying on would raise to a very high level of probability of that occurring" (Ex. 55 at 62). Ultimately, Cohen acknowledged the perceived pressure, but the decision to ask for Greenberg's "retirement as CEO," in Cohen's words, was the Board of Directors' decision (Ex. 6 at ¶¶11-12). Hills also acknowledged that Paul Weiss, as outside counsel for AIG, presented the Board with facts, judgments, and conclusions, as well as a plan for restating AIG's financials, and the Board of Directors followed Paul Weiss' conclusions (Ex. 7 at ¶17).
According to Beattie, on March 14, 2005, the Board of Directors voted to remove Greenberg as Chief Executive Officer for two reasons:
1. The auditors could no longer rely on Greenberg's certifications; and
2. Greenberg refused to waive his Fifth Amendment privilege against self-incrimination, and instead stated he would invoke the privilege, on advice of counsel, which was contrary to a company policy he approved.
(Ex. GG at 47-49). Beattie and Frank Zarb telephoned Greenberg, told him about the vote, and indicated a willingness "out of courtesy to put it in terms of a resignation by him" (Ex. GG at 61-62). There was no discussion of Greenberg continuing as Chairman. According to Beattie, Spitzer "said absolutely nothing about Hank [Greenberg] leaving as Chairman" (Ex. HH at 2). Greenberg admitted his removal as CEO was not voluntary (Ex. U at 24-25; Ex. 57 at 507-508).
Greenberg retired as Chairman of AIG two weeks after the Board of Directors voted to remove him as CEO. He communicated his intention to retire through a letter from his attorney, David Boies (Ex. 60). The letter did not reference Spitzer's actions (Ex. 60). At the time of Greenberg's removal, AIG issued a press release stating the filing of the 10-K would be delayed, in part due to "the Company's ongoing internal review of the accounting for certain transactions" (Ex. 59 at 1-2).
RESTATEMENT
Restatements are required to correct material accounting errors that existed at the time the financial statements were originally issued. Restatements are highly probative of fraud ( In re WorldCom, Inc. Securities Litigation , 388 F Supp 2d 319, 327 [SDNY 2005] ). In May 2005, AIG announced it would be restating its financial statements for prior years (Ex. Q at 3, 100; Ex. R at ¶29). Greenberg personally certified at least four of those statements (Ex. S). AIG's 10-k for the period ending December 31, 2004 contained a Restatement of Previously Issued Financial Statement ("Restatement") (Ex. 19; Ex. Q). This Restatement covered the years ending December 31, 2000 through December 31, 2003; the quarters ending March 31, June 30, and September 30, 2003 and 2004; and the quarter ending December 31, 2003. It recited the investigations initiated by the NYAG and the SEC relating to "investigations into the use of non-traditional insurance products and certain assumed reinsurance transactions and AIG's accounting for such transactions," and referred to other investigations by the DOJ and various state regulators.
AIG explained:
"In many cases these transactions or entries appear to have had the purpose of achieving an accounting result that would enhance measures believed to be important to the financial community and may have involved documentation that did not accurately reflect the true nature of the arrangements. "
(Ex. 19 at 30 [emphasis added] ). The Restatement covered a large number of transactions (more than 30), but here, the present focus is on the treatment of the GenRe and CAPCO transactions as they relate to the issues before the Court. For purposes of defamation, it is the fact of the Restatement and its contents that concerns the Court, not the size or significance of the transactions.
AIG concluded the Gen Re transaction "was done to accomplish a desired accounting result and did not entail sufficient qualifying risk transfer. As a result AIG has determined that the transaction should not have been recorded as insurance," and the Restatement recharacterized "the transaction as a deposit rather than as insurance" (Ex. 19 at 31-32). Similarly, the CAPCO transaction was undertaken to record transactions by converting underwriting losses to investment losses and for which the accounting was not in accordance with GAAP. The transaction's structure appears to have not been properly disclosed to appropriate AIG personnel or its independent auditors. This occurred because
"AIG's controls within its control environment were not effective to prevent certain members of senior management, including the former Chief Executive Officer and former Chief Financial Officer from having the ability, which in certain instances was utilized , to override certain controls and effect certain transactions and accounting entries....[which] appear to have been largely motivated to achieve desired accounting results and were not properly accounted for in accordance with GAAP. Further... information critical to an effective review of transactions, accounting entries and certain entities... were not disclosed to the appropriate financial and accounting personnel."
(Ex. Q at 100 [emphasis added] ). These deficiencies, and others, permitted, and enabled, the CAPCO and Gen Re transactions. The parties have placed a different level of significance on these events. Plaintiff relies on aggressive accounting to support a claimed lawful result, with an insignificant impact on AIG and its investors. Plaintiff also asserts that the accounting issues did not prevent AIG's auditors from approving prior financial statements. Defendant views these actions as indicative of deception and trickery giving rise to the fraud claim.
ENFORCEMENT
1. People ex. rel Spitzer v AIG, Greenberg, and Smith
On May 26, 2005, one week before AIG's filing of the Restatement, the NYAG commenced an action against Plaintiff and Howard I. Smith, AIG's former Chief Financial Officer, alleging Martin Act ( General Business Law § 352-c[1] ) violations in seven transactions (Ex. V). On September 6, 2006, following a January 2006 settlement of part of the action with AIG, which agreed to pay 1.6 billion dollars in damages and penalties, the NYAG amended the Verified Complaint to dismiss three transactions. A fourth transaction was later dismissed pursuant to the parties' agreement (Ex. 27). In part, that Amended Verified Complaint alleged two sham reinsurance transactions proposed, initiated, and negotiated by Greenberg that were designed to give the investing public the impression that AIG had a larger cushion of revenues than it actually did. These were the Gen Re and CAPCO transactions, and in each of the schemes, it was alleged the investing public was misled as to the true state of AIG's business. The Martin Act litigation was still pending at the time of Spitzer's July 2012 television appearances, although Spitzer's role in that litigation as Attorney General had ended in December 2006, when he was elected Governor. That litigation ran its own substantial course with lengthy discovery, a hiatus for settlement efforts, and a lengthy trial before Justice Ramos.
In July 2010, Justice Ramos rendered a lengthy and cogent decision, concluding that Greenberg violated the Martin Act and Executive Law § 63(12) based on his "knowledge of and participation in facilitating the CAPCO transaction" ( People ex rel. Cuomo v Greenburg , 2010 NY Slip Op 33216[U], *34). In modifying Justice Ramos' decision, the First Department found issues of fact existed as to whether Greenberg and co-defendant Smith knew of, or participated in, the fraudulent aspects of the schemes arising out of the Gen Re and CAPCO transactions, as well as the materiality of the CAPCO transaction ( 95 AD3d at 484-485 ). The Appellate Division decision was rendered two weeks prior to the Spitzer television appearance ( People ex rel. Cuomo v. Greenburg , 95 AD3d 474 ).
2. SEC v AIG
The SEC filed its own action against AIG on February 9, 2006, essentially alleging the same claims advanced by the NYAG, but based on federal law violations (Ex. R). Specifically, it alleged that from at least 2000-2005, AIG materially falsified its financial statements through two sham transactions with Gen Re and CAPCO to paint a false, but rosy, picture of AIG's financial condition to analysts and investors. AIG entered into a consent judgment "without admitting or denying the allegations of the Complaint" in favor of the SEC and against AIG in the total amount of 800 million dollars, allocated as 700 million dollars disgorgement of "profits gained as a result of the conduct alleged in the Complaint," and 100 million dollar civil penalty (Securities and Exchange Commission v American International Group, Inc. , US Dist Ct, SD NY, 06 Civ 1000, Preska, J., 2006). The funds recovered shall be distributed "for the benefit of investors" (id. at 6). AIG simultaneously resolved its litigation with the NYAG and others. The combined total payment was 1.644 billion dollars and included a 35 million dollar penalty imposed by the Department of Justice to resolve criminal exposure arising from its accounting statements.
Disgorgement is defined as the equitable remedy that deprives wrongdoers of their net profits from unlawful activity, and reflects the foundational principle that " ‘it would be inequitable that [a wrongdoer] should make a profit out of his own wrong’ " (Liu v. Securities and Exchange Commission , ––– US ––––, 140 S Ct 1936, 1940-1943 [2020], quoting Root v Lake Shore & M.S. Ry., Co. , 105 US 189, 207 [1881] ).
Although this Judgment was not submitted as an exhibit, the Court takes judicial notice of its contents after retrieval of a copy from the United States District Court for the Southern District of New York.
AIG's legal difficulties predated the Gen Re and CAPCO investigations. In November, 2004, AIG paid 126 million dollars in a settlement arising from civil and criminal securities fraud in transactions while Greenberg was CEO (Exs. L-Q). As part of that settlement, AIG and its subsidiary AIG Financial Products Corp (AIG-FP) acknowledged, in part, in addition to other accounting matters, that they "[transferred] risk through an insurance transaction in which a material term relating to such risk transfer (whether or not legally enforceable) is not reflected in the formal written contractual documentation for the transaction" (Ex. O at 5 [emphasis added] ). AIG also was forced to disgorge 46 million dollars in fees it received and interest on those fees together with a penalty of 80 million dollars. These transactions pose the issue of whether they were intended as insurance to manage risk, or whether they were vehicles designed to inflate earnings. They appear to be the impetus for the investigations of AIG, not Greenberg, by the SEC and the NYAG launched at that time.
3. SEC v Greenberg and Smith
On August 6, 2009, the SEC filed a complaint against Plaintiff and Smith (Ex. Y). The SEC alleged Greenberg, as a control person of AIG "[was] aware of transactions that enabled AIG to create the false impression that it consistently met or exceeded expectations for these key financial measures" (Ex. Y at ¶2 ). The action was settled the day it was filed, presumably as the result of lengthy, pre-commencement negotiations between the SEC and Greenberg's attorney, Robert Morvillo. In that settlement, Greenberg personally agreed to the disgorgement of 7.5 million dollars and a penalty of 7.5 million dollars, for a total payment of 15 million dollars (Ex. Z at 4). As part of the Consent Judgment, Greenberg neither admitted nor denied the allegations of the Complaint, and he agreed not to deny "directly or indirectly any allegation in the Complaint or creat[e] the impression that the Complaint is without a factual basis," although he had the "right to take legal or factual positions in litigation or other legal proceedings in which the Commission is not a party" (Ex. Z at ¶12).
According to the SEC, its policy is "to avoid creating or permitting to be created an impression that a decree is being entered or sanction imposed, when the conduct alleged did not, in fact occur" ( 17 CFR 202.5 [e] ). Thus, a defendant may not enter into a judgment while denying the allegations, but the SEC may permit it where a defendant neither admits nor denies the allegations ( 17 CFR 202.5 [e] ). Consequently, as it pertains to the instant case, the salient allegations contained in Paragraphs 1, 2, 4, 5, 6, 28, 30, 32, 33, 39, 46, 51-62, 65, and 70 of the SEC Complaint stand unrefuted by Plaintiff. Greenberg's assertion that he neither admits nor denies the allegations of the Complaint is contradicted by the statement he issued at the time of that settlement (Ex. AA). There, he admitted that he "initiated, participated, and approved these two transactions" (Ex. AA). He further admitted that as a result of the Gen Re and CAPCO transactions "AIG's publicly-filed consolidated financial statements inaccurately portrayed the accounting, and thus the financial condition and performance for AIG's loss reserves and underwriting income" (Ex. AA).
THE CLOSING BELL
On July 13, 2012, Spitzer appeared on the CNBC television program "The Closing Bell," with Maria Bartiromo. "The Closing Bell" is, in part, an interview format involving news, discussions, information, and controversies in the financial world, as well as the impact of stock market daily trading, thereby creating "winners" and "losers" at the "closing bell," which signifies the end of the trading day. It provides a forum for debate and expression of opinion, and the audience would be accustomed to, and would expect, opinion, criticism, exaggeration, and hyperbole (see e.g. Fram v. Yellow Cab Co. of Pittsburgh , 380 F Supp 1314 [WD Pa 1974] ). On this particular episode of "The Closing Bell," the audience would not have been disappointed. The setting was hardly one for a complete presentation of the 12-year history and details of the AIG saga and the various judicial actions. Any discussion of the events would be condensed and the discussion could not avoid the participants' subjective viewpoints.
The Court viewed a recording of the subject program on the date Defendant appeared (Ex. G). Spitzer came on the show to discuss LIBOR issues, to respond to issues concerning Greenberg, and to respond to Dennis Vacco's comments (Ex. FF at 35-36). Vacco appeared on the program a few days before and claimed that eight years earlier, in September 2004, Spitzer made a "startling personal attack" on Greenberg which left Vacco feeling that Spitzer was driven by a personal animus (Ex. 9 at 5). The news value about an eight-year-old memory might be questionable, but it was guaranteed to generate comment and debate. This interview set up the Bartiromo-Spitzer exchange. Bartiromo's questions regarding Vacco, as expected, would elicit a response reflecting a bias that should not be taken as objective fact.
Spitzer had been invited to appear on the same day as Dennis Vacco, but declined. His invitation was extended to July 13th. Vacco was Spitzer's predecessor as Attorney General (Exs. 40, 42, 44).
Vacco's Affidavit, sworn to on June 28, 2012, is Plaintiff's Exhibit 5. It is noteworthy for its absence of direct quotes, or words attributed to Spitzer, but contains Vacco's thoughts about Spitzer's state of mind in 2004. The transcript of Vacco's appearance is contained in Plaintiff's Exhibit 9.
The segment with Bartiromo and Spitzer began with an introduction and an unrelated topic (LIBOR). The interview was unscripted and unrehearsed. The participants engaged in some repartee, but the conversational tone soon gave way to a brash argument complete with interruptions, chopped statements, each person trying to talk over the other, acerbic language, and hot-button rhetoric. It was evident that Bartiromo and Spitzer were speaking from their respective viewpoints, signaling to the viewer/listener their own opinions. At times, Spitzer invited Bartiromo, and the audience, to determine for themselves the credibility of his statements ("Here is the federal judge's opinion that says he was a conspirator." "Read the federal judicial opinions." "You want the transcript? Here's the transcript."). This "invitation" to "see for yourself," to some degree, negates a claim of a factual assertion giving rise to actual malice when the speaker invites the audience to draw its own conclusions, and, at the very least, acknowledges the door may be open to more than one conclusion.
During the program, Spitzer was asked about the transactions in 2000 that gave rise to the Martin Act litigation, including Greenberg's role, and the circumstances surrounding Greenberg's termination as Chairman and Chief Executive Officer of AIG years earlier. Bartiromo's interview with Defendant was contentious, as she interrupted and challenged him. She repeatedly asked him about the fraud charges, but seemed to lack an understanding of the difference between civil and criminal fraud within the underlying transactions. She also asked Defendant about a personal vendetta against Plaintiff, echoing some of the arguments made in the instant action, which he denied. Bartiromo attempted to draw a line from AIG's 2000-2005 accounting violations to AIG's 2009 financial problems, despite the fact they were unrelated ("In fact, some people might say the collapse of AIG lays at your feet because if Hank Greenberg were there, he would not have allowed some of that craziness and that risk being taken on" and "His camp will say you destroyed his reputation and caused the collapse of AIG") [Ex. 15 at 10, 18] ). The spontaneous and uncharted nature of the exchange compelled the actions, reactions, and statements of both participants complete with hyperbolic opinions and invective. Notably, Defendant's appearance was followed by the appearance of Lee Wolosky, an attorney for Plaintiff, who, without challenge from Bartiromo, responded to Spitzer's statements. One could not help but notice the different treatment received by this guest (Ex. 15 at 28-32).
The full interview segment is set forth below. The remaining statements at issue are set forth in italics. During the program, Spitzer made the following statements (Ex. 15 at 8-13, 17-21, 23, 24-26):
The parties stipulated to the transcript (Exs. 1, 15; Ex. II). The allegedly defamatory words are italicized, and the entirety of the discussion is designed to provide some context (Abakporo v. Daily News , 102 AD3d 815, 816 [2d Dept 2013] ).
Maria Bartiromo: Let me move onto something you spent a lot of time on over the last several years. I want to ask you about these new explosive allegations surrounding your charges against Hank Greenberg when he ran AIG.
Eliot Spitzer: Right.
Maria Bartiromo: You brought eight charges against Greenberg during your time as Attorney General. Six have been dropped - - six - -
Eliot Spitzer: Now, now.
Maria Bartiromo: - - of the eight. Two remain.
Eliot Spitzer: We brought - - we brought - -
Maria Bartiromo: Six charges have been dropped.
Eliot Spitzer: Maria, wait a minute. Let's deal with facts for a minute. We brought a charge that AIG's accounting was fundamentally fraudulent. The company admitted that. The Justice Department, the SEC joined us in those charges. The company's Board removed Hank Greenberg. I went - - you know, because of wha - - the silliness that is attached to this claim, people saying I did this out of personal invective or somehow personal animus - - . [Amended Complaint, ¶20]
Maria Bartiromo: That's right.
Eliot Spitzer: Can I tell you something very simple? And I don't know if this is going to make Hank feel better or not. I have no emotions about him one way or the other. He is merely one in a litany --
Maria Bartiromo: Well, some people --
Eliot Spitzer: He is basically — Maria, he's one in a litany of corporate executives who defrauded the market. We prosecuted them. The charge against a prosecutor that a prosecutor's motive is flawed is the last refuge of the guilty. I've had this claim made against me by every person we prosecuted. [Amended Complaint, ¶ 20]...
Maria Bartiromo: Look, I -- I —
Eliot Spitzer: Hank Greenberg.
Maria Bartiromo: I have problem with —
Eliot Spitzer: If — it's your show. Wait a second. Let me just finish this thought. I know it's your show. You're the host. But give me one second. Hank Greenberg was thrown out by his own company's Board. He was called a conspirator —
Maria Bartiromo: Under pressure from you.
Eliot Spitzer: — by a Federal Judge.
Maria Bartiromo: In fact, some people might say the collapse of AIG lays at your feet because if Hank Greenberg were there, he would not have allowed some of that craziness and that risk being taken on.
Eliot Spitzer: Maria - -
Maria Bartiromo: I just want to ask you about this whole personal vendetta.
Eliot Spitzer: There are people who still think that the moon - - that the sun revolves around the Earth. You know, let's deal with reality here. Hank Greenberg's accounting was fraudulent. His company threw him out. [Amended Complaint, ¶ 21]
Maria Bartiromo: Come on. You can't say fraudulent because there's no - - there's no indictment. You can't just throw around the word fraud.
Eliot Spitzer: Here's - - here is the federal Judge's opinion that says he was a conspirator. Here are the headlines. His company throwing him out.
Maria Bartiromo: So then why no charges? Then why were four charges - - why six out of the eight charges dropped then?
Eliot Spitzer: You want to know why, because the feds - -
Maria Bartiromo: What's the answer?
Eliot Spitzer: The answer is we charged the company, cleaned it up, got new leadership. The Southern District said to me, we're going to bring the charges. We let the Southern District. This has all been documented. We said, you want to do that? Fine.
Maria Bartiromo: And Hank Greenberg is still now running C.V. Starr, running, you know, doing - -
Eliot Spitzer: You know - -
Maria Bartiromo: - - living his life, so I mean, all these charges that you throw out so cavalier, it just - - there's no evidence to support that, Eliot.
Eliot Spitzer: Maria, look, I hate to say this to you, deal with facts and reality; not what Hank Greenberg's PR machine wants you to believe. Hank Greenberg was thrown out by his own Board. His company paid 1.6 billion dollars in a settlement, acknowledged that his accounting was fraudulent. These are facts. Read the federal judicial opinions. He was the one who instigated the conspiracy. [Amended Complaint, ¶ 22]
Maria Bartiromo: Let me ask you about this.
Eliot Spitzer: Wait, wait. Let me just finish this. He is the one who began - - this is from a federal Judge - - began and instigated the conspiracy, fraudulent reinsurance contracts - - you know who brought the case to us?
Maria Bartiromo: But no charges.
Eliot Spitzer: No, no, no, no. You're wrong.
Maria Bartiromo: But all these charges have been dropped.
Eliot Spitzer: Maria, no. You're wrong.
Maria Bartiromo: You're still not answering that.
* * *
Maria Bartiromo: Come on.
Eliot Spitzer: You're saying a Board — wait a minute, wait a minute, the Board of AIG which had the most August membership removed and fired Hank Greenberg because I called up the phone and said, I want him gone? Maria, I hate to say it - -
Maria Bartiromo: You went on Sunday morning television and said he committed fraud and we have no evidence of this so many years later still - -
Eliot Spitzer: No, no, no, no. Let me tell you what I said.
Maria Bartiromo: Okay.
His camp will say you destroyed his reputation and caused the collapse of AIG.
Eliot Spitzer: No, no. Maria, unfortunately, I have in front of me the transcript of what I said on Sunday morning TV with - - in front of - - with George Stephanopulos.
You want the transcript?
Maria Bartiromo: Yeah.
Eliot Spitzer: Here's the transcript.
Maria Bartiromo: Yeah.
Eliot Spitzer: Deals were fundamentally flawed. The evidence is overwhelming that these were transaction[s] created for the purpose of deceiving the market. We call that fraud. It's deceptive. It's wrong. It's illegal. That company was a black box run with an iron fist by a CEO who did not tell the public the truth.
Every piece of that statement was accurate, has been proven. [Amended Complaint, ¶ 24]
Maria Bartiromo: Well, you use the word fraud. That's - -
Eliot Spitzer: Here is - -
Maria Bartiromo: - - the point.
Eliot Spitzer: That's right.
And Maria.
Maria Bartiromo: And then you color everybody else's opinion even though to this day we don't have any charges of that. The charges are being dropped.
Eliot Spitzer: Maria - - Maria, here is the federal court opinion. Do you want to read it? 29 pages. Hank Greenberg, co-conspirator in fraud. Facts matter, Maria. I know this is cable TV, but facts matter.
Maria Bartiromo: I'm aware facts matter.
Eliot Spitzer: You need to understand - - Maria, you need to understand AIG was being led by a CEO whose accounting was fraudulent. That's why the Board removed him. He paid a fine of 1.6 billion dollars. Hank, you know , I'd be happy to have coffee with him - - [Amended Complaint, ¶ 26]
Maria Bartiromo: He - - I know he is trying - - there's a court order - - he's trying to get your personal e-mails because he says that you on personal e-mails - -
Eliot Spitzer: Right.
Maria Bartiromo: - - also tried to get him, you know, bring him down.
Are you going to release those e-mails that he's looking to get, the personal e-mails?
Eliot Spitzer: You know, Maria, as I've said to people, there ain't no such thing. He thinks they're personal e-mails in which I was somehow making comments about Hank. There is no such thing. Hank Greenberg at AIG committed fraud. The record on that is indisputable . [Amended Complaint, ¶27]
Maria Bartiromo: But there is no no evidence of that. You say it again, you keep saying fraud.
But there's no charge of fraud.
Eliot Spitzer: Maria, Maria, you can say it over and over. Here's the 29 page federal court opinion.
* * *
Eliot Spitzer: Does this opinion - - does this opinion say that he is a conspirator whose actions began the conspiracy? [Amended Complaint, ¶29]
* * *
Eliot Spitzer: Well, I'm asking you a question. I'm asking you a question.
Maria Bartiromo: What's the question?
Eliot Spitzer: You said you read the opinion.
Does this opinion say that Hank Greenberg's actions began the conspiracy that led to fraud?
Maria Bartiromo: No, it does not.
Eliot Spitzer: Really though? Okay. Okay.
Maria Bartiromo: It does not say Hank Greenberg committed fraud. You said it. You have continued to say it.
Eliot Spitzer: Does it say he's a conspirator?
Maria Bartiromo: And you say it all the time.
Eliot Spitzer: Does it say - -
Maria Bartiromo: And I want to just get to the facts here.
Eliot Spitzer: All right.
Maria, here's the problem. The problem is that you want to repeat at nauseam things that simply are coming out of the PR machine of Hank Greenberg that defy logic, fact - -
Maria Bartiromo: I am not doing that. I'm looking at the facts.
Eliot Spitzer: - - factual record.
Maria, I'm going to ask you now to give a little deference to a guest, somebody who is the attorney general who prosecuted these cases. The reason the Wall Street environment is falling apart is because there's an inability on the leadership's part on Wall Street to acknowledge what happened.
If they had just said, you know what? Those transactions were flawed, we shouldn't have done it. We're not going to do it again, we're done. That's what we did in most of our cases.
Maria Bartiromo: Right.
Eliot Spitzer: He continues to this day to dispute facts that have been proven beyond any dispute.
Do you know who brought this case to us? Berkshire Hathaway and Warren Buffet. They came to us and said, these deals are crooked. Warren Buffet. This was not something we ginned up.
Maria Bartiromo: Yeah.
Eliot Spitzer: Warren Buffet brought it to us. This is all documented. This is the history. It is clearly known. Now I think if the public were to understand what was going on at AIG, they would agree that if anything, more should have been done. More Should have been done.
Maria Bartiromo: Yeah.
Certain claims were withdrawn upon the settlement with AIG. Another claim was dismissed after defendant left the Attorney General's office upon becoming Governor.
The Amended Complaint (¶21) does not contain the allegation "His company threw him out." Instead, it ends with "His company...". Consequently, this sentence is not included with the so called "removal" statements (see infra ).
Three days later, on his own program "Viewpoint," Spitzer re-played several portions of the July 13th Bartiromo interview (Ex. 16). Approximately one year later, Spitzer authored a book entitled Protecting Capitalism Case by Case , containing similar references to Greenberg, Gen Re and CAPCO (Ex. 17).
PRIOR MOTION TO DISMISS
Defendant moved to dismiss the Amended Complaint pursuant to CPLR § 3211(a)(1) and (7) on the grounds that the challenged statements: (1) were substantially true; (2) were privileged under Civil Rights Law § 74 as a fair and true report of a judicial proceeding; (3) failed to sufficiently plead actual malice; or (4) were otherwise non-actionable. The motion was granted in part and denied in part ( Greenberg v. Spitzer , 44 Misc 3d 1202[A] [Sup Ct, Putnam County 2014] [Lubell, JSC] ). Both parties appealed. The Appellate Division, Second Department acknowledged the obligation to give the Amended Complaint "a liberal construction, accept the facts alleged in the complaint to be true and afford the Plaintiff ‘the benefit of every possible favorable inference’ "( Greenberg v. Spitzer , 155 AD3d 27, 53-55 [2d Dept 2017] ), and determine only whether a cause of action exists.
In determining whether a complaint states a cause of action to recover damages for defamation, the dispositive inquiry is whether a reasonable listener or reader [or viewer] could have concluded that the statements were conveying facts about the plaintiff ( Goldberg v. Levine , 97 AD3d 725 [2d Dept 2012] ; see Gross v. NY Times Co. , 82 NY2d 146, 152-153 [1993] ). "Unlike on a motion for summary judgment where the court searches the record and assesses the sufficiency of the parties' evidence, on a motion to dismiss the court merely examines the adequacy of the pleadings" ( Davis v. Boeheim , 24 NY3d 262, 269 [2014] ). While the plaintiff is accorded the favorable review of the pleadings, the issue of whether certain words are defamatory is an issue of law for the court and may be addressed at the pre-answer stage, or upon completion of discovery ( Aronson v. Wiersma , 65 NY2d 592, 593 [1985] ).
Applying this criteria, the Appellate Division modified Hon. Lewis J. Lubell, JSC's Order to the extent it dismissed the statements predicated on the contents of Protecting Capitalism ( Greenberg v. Spitzer , 155 AD3d at 53-55 ). The Appellate Division also rejected the assertion of Civil Rights Law § 74, which provides for a defense based on a fair and true report of a judicial proceeding, concluding that Defendant conflated the finding in Ferguson with other proceedings and facts which rendered the reference in Ferguson less than "fair and true" ( Greenberg v. Spitzer , 155 AD3d at 50 ). Similarly, the statements concerning Greenberg's removal were tied to the insinuation of misconduct relating to the Gen Re and CAPCO transactions ( Greenberg v. Spitzer , 155 AD3d at 48 ). The Second Department neither explained how the issues surrounding 12 years of events, including eight years of litigation in multiple forums, could have been explained without some conflation nor how the show's content could have avoided the context of the proceedings. In addition, the court viewed Greenberg's testimony that he "lost his job" as evidence of the fact, but the documentary evidence was inconclusive. That determination may be consistent with the broad view of pleadings on a CPLR § 3211 motion, as well as the shortcomings of the documentary evidence found by the Appellate Division, but it did not foreclose consideration of these issues on a motion for summary judgment. If such consideration was foreclosed, the Appellate Division would have granted Plaintiff judgment. Instead, at this stage, the matter is now ripe for consideration. In addition, the evidentiary shortcomings have been eliminated, and the documentary evidence need not "conclusively establish" a fact, or defense, as it would in a motion pursuant to CPLR § 3211. The Appellate Division limited its focus to the statements alleged in the complaint and omitted any discussion of matters between 2005 and 2012. The matter was remanded to this Court, and a prior motion for summary judgment was denied without prejudice to renewal upon completion of discovery. The parties exchanged a massive amount of discovery under the supervision of a Referee, Hon. Joel M. Aurnou, a retired Judge.
Neither party has raised any evidentiary objections to the exhibits submitted. Accordingly, the Court can consider all of them, including items that otherwise may be inadmissible hearsay (Rosenblatt v. St. George Health and Racquetball Associates, LLC, 119 AD3d 45, 52, 54-55 [2d Dept 2014] ), citing Prince, Richardson on Evidence § 8-108 [Farrell 2008] ). The weight to be accorded each exhibit is another matter.
STANDARD OF REVIEW
With discovery completed, Defendant now asserts that Plaintiff cannot prove actual malice and the Amended Complaint should be dismissed. Defendant's motion for summary judgment invokes the requirements of CPLR § 3212(b). With the benefit of extensive pre-trial discovery and viewing the evidence most favorably to Plaintiff, the issue before the Court is whether Plaintiff has adduced sufficient evidence to prove the statements were made with actual malice. The Court finds Plaintiff has not.
The parties waived a jury trial in the event the motion is denied.
On a motion for summary judgment, facts must be viewed "in the light most favorable to the non-moving party" ( Ortiz v. Varsity Holdings LLC , 18 NY3d 335, 339 [2011] ). The issue of whether certain words are defamatory, as previously stated, is an issue of law for the court. However, "[s]ummary judgment should be granted, where appropriate, to defendants in libel actions in order to prevent harassment and coercion in the open arena of ideas, and to end meritless libel actions as early as possible in order to limit the waste of resources of both the defendants and the courts" ( Carter-Clark v. Random House, Inc. , 196 Misc 2d 1011 [Sup Ct, NY County 2011], citing Immuno A.G. v. Moor-Jankowski , 145 AD2d 114, 128 [1st Dept], affd 74 NY2d 548 [1989], rearg denied 75 NY2d 866, judgment vacated 497 US 1021 [1990], on remand 77 NY2d 235, cert denied 500 US 954 [1991] ).
Viewed as the rule, rather than the exception, summary judgment is favored in defamation cases ( Ithaca Coll. v. Yale Daily News Publ. Co., Inc. , 105 Misc 2d 793, 796 [Sup Ct, Tompkins County 1980), affd 85 AD2d 817 [3d Dept 1981] ); Rinaldi v. Holt, Rinehart & Winston, Inc. , 42 NY2d 369, 385 [1977] ; Gurda v. Orange County Publ. Div. of Ottaway Newspapers, 81 AD2d 120 [2d Dept 1981], revd 56 NY2d 705 [1982] ). Once the defendant has shown entitlement to summary judgment, the plaintiff has the burden of establishing with "convincing clarity" that the statements were published with actual malice. Credibility claims that may negate summary judgment in the usual tort cases must yield to the issues of law and First Amendment claims in the defamation arena ( Khan v. New York Times Co., Inc. , 269 AD2d 74, 79 [1st Dept 2000] ; Immuno AG v. Moore-Jankowski , 77 NY2d at 249-250 ).
Here, Defendant's motion is predicated on the assertion that Plaintiff cannot prove "actual malice" as required by law. "Actual malice" requires proof that the published statement was made "with knowledge that it was false or with reckless disregard of whether it was false or not" ( New York Times Co. v. Sullivan, 376 US 254, 280 [1964] ). Kipper v. NYP Holdings Co., Inc . (12 NY3d 348, 354 [2009] ) makes clear that "a libel defendant's burden in support of summary judgment is not,... to prove as a matter of law that it did not publish with actual malice, but to point to deficiencies in the record that will prevent plaintiff from proving that fact by clear and convincing evidence" (see also Millus v. Newsday, Inc . 89 NY2d 840 [1996] ; Difabio v. Jordan , 113 AD3d 1109 [4th Dept 2014] ).
Plaintiff suggests the burden of proof is on Defendant to show the impossibility of Plaintiff establishing the falsity or reckless disregard of the truth in order to succeed on his motion (Memorandum in Opposition at 5-6). Plaintiff is incorrect. In Anderson v. Liberty Lobby, Inc . (477 US 242, 255-256 [1986] ), the United States Supreme Court addressed this issue and unequivocally held:
"Thus, where the factual dispute concerns actual malice,... the appropriate summary judgment question will be whether the evidence in the record could support a reasonable jury finding either that the plaintiff has shown actual malice by clear and convincing evidence or that the plaintiff has not."
Prior to Liberty Lobby , in Roche v. Hearst Corp . (53 NY2d 767, 769 [1981] ), the New York Court of Appeals stated "it was incumbent on the plaintiff upon defendant's motion for summary judgment to produce evidence tending to demonstrate both the falsity of the published statements and that they were made with actual malice, i.e. deliberate or reckless falsehood." In Goldblatt v. Seaman (225 AD2d 585, 586 [2d Dept 1996] ), the Appellate Division stated the issue succinctly:
"In determining whether a defendant published a statement with actual malice, the issue for a court on a motion for summary judgment is whether the plaintiff has met his or her burden of presenting evidence that could demonstrate, with convincing clarity, that a defendant either knew that the statements were false or published them with a high degree of awareness that they were probably false."
The evidence submitted in support of each element of the cause of action, or defense, must be in admissible form. This requirement differs from the treatment of various forms of "documentary evidence" under CPLR § 3211(a)(1) ( Greenberg v. Spitzer , 155 AD3d at 44-46 ). In addition, many of Defendant's exhibits are pleadings or submissions in related actions initiated by the NYAG or the SEC, and may be properly the subject of judicial notice.
DEFAMATION
The common law origins of the law of defamation have evolved with the application of constitutional principles of free expression, placing an emphasis on a belief that vigorous debate outweighs the potential wounds to an individual's reputation ( Gross v. New York Times Co. , 82 NY2d 146, 152 [1993] ). However, such debate or public discussion is not unbridled; it is constrained by a set of rules acknowledging the value of one's reputation and found within the law of defamation. Thus, a statement may be defamatory if it "tends to expose a person to hatred, contempt or aversion, or to induce an evil or unsavory opinion of him in the minds of a substantial number of the community" ( Mencher v. Chesley , 297 NY 94, 100 [1947] ), or "reflect[s] on [his] performance or be incompatible with the proper conduct of [his] business" ( Golub v. Enquirer/Star Group , 89 NY2d 1074, 1076 [1997] ).
The elements of a cause of action for defamation are simply:
1. A false statement that tends to expose a person to public contempt, hatred, ridicule, aversion, or disgrace;
2. Published without privileged or authorization to a third party;
3. Amounting to fault as judged by, at a minimum, a negligence standard; and
4. Either causing special harm or constituting defamation per se.
( Stone v. Bloomberg L.P. , 163 AD3d 1028, 1029 [2nd Dept 2018] ; Greenberg v. Spitzer , 155 AD3d at 41 ; Dillon v. City of New York , 261 AD2d 34, 38 [1st Dept 1999] ). Further, there must be an element of malice in the form of ill will, hostility or spite to establish common law defamation ( Friedman v. Ergin , 110 AD2d 620 [2d Dept 1985], affd 66 NY2d 645 [1985] ). "Actual malice" in the form of knowledge of falsity or a reckless disregard for the truth is required, where, as here, Plaintiff is a public figure ( New York Times Co. v. Sullivan , 376 US at 279-280 ; see also Curtis Pub. Co. v. Butts , 388 US 130 ).
Plaintiff "does not contend that he is a private figure for purposes of the application of the law of defamation to his claims in this action" (Ex. DD at 14). Moreover, as an individual who has "assumed an ‘influential role in ordering society,’ " Greenberg is a public figure (Gertz v. Robert Welch, Inc. , 418 US 323, 345 [1974], quoting Curtis Pub. Co. v. Butts , 388 US at 164 ).
The burden is on Plaintiff to allege and prove the (1) falsity of the statements attributed to Defendant, as well as (2) Defendant's knowledge of its falsity, or (3) a reckless disregard for its truth by clear and convincing evidence. A statement is not false unless it would have a different effect on the mind of the reader/listener from that which the pleaded truth would have produced ( Masson v. New Yorker Magazine, Inc. , 501 US 496, 516 [1991] ; Fleckenstein v. Friedman 266 NY 19, 23 [1934] ; Greenberg v Spitzer, 155 AD3d at 41 ). The challenged statement must be substantially true to be nonactionable ( Love v. Morrow & Co. , 193 AD2d 586, 587-588 [2d Dept 1993] ). "Even if a publication is not literally or technically true in all respects, the absolute defense applies as long as the publication is ‘substantially true’ " ( Carter v. Visconti, 233 AD2d 473 [2d Dept 1996] [citations omitted] ).
There is the recognition that erroneous statements are inevitable in a free debate ( Sullivan , 376 US at 271-272 ). The "reckless disregard" must be based on evidence that leads to the conclusion that the defendant entertained serious doubts about the truth of the publication (see St. Amant v. Thompson , 390 US 727, 731 [1968] ). It is a far more "daunting burden" than that required to withstand a motion under CPLR § 3211 ( Gross v. New York Times Co. , 281 AD2d 299 [1st Dept 2001] ). Such a standard ensures "that debate on public issues should be uninhibited, robust, and wide-open, and that it may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government[,] public officials," and public figures ( Sullivan , 376 US at 270 ).
DEFENSES
Beyond defamation's elements are several defenses available to Defendant. As applied here, the defenses include: (1) the truth of the statements made; and (2) the statements contain opinions rather than statements of fact. These defenses, if applicable, would defeat the claim of "actual malice." Truth has always been an absolute defense against defamation ( Goldberg v. Levine , 97 AD3d at 726 ). Since Plaintiff's obligation to establish the falsity of the statements is limited by the recognition that "only ‘facts’ are being capable of proven false, ‘it follows that only statements alleging facts can properly be the subject of a defamation action’ " ( Gross , 82 NY2d at 152-153 [citations omitted] ). At the same time, opinions, no matter how objectionable, are not actionable ( Davis v. Boeheim , 24 NY3d 262, 268 [2014] ; Steinhilber v. Alphonse , 68 NY2d 283, 289 [1986] ).
The defense under Civil Rights Law § 74 is not included based on the Appellate Division's ruling. However, the determination that Defendant's interview statements were not a "fair and true report" pursuant to Civil Rights Law § 74 simply denies to Defendant the affirmative defense of a dispositive privilege; it does not prevent Defendant from asserting Ferguson and other sources to defend against the claims of falsity or Defendant's actions with a reckless disregard for the truth. Such a limitation on Defendant would raise serious First Amendment issues. The Second Department linked Defendant's statements about Ferguson to other statements of fact or fact/opinion in concluding Defendant did not provide a "fair and true report" (Greenberg v. Spitzer , 155 AD3d at 50 ["they were intertwined with allegedly defamatory remarks about Greenberg having engaged in fraud..."] ). But beyond the privilege issue, the linkage has no relevance. Instead, each statement should be viewed in the context of the interview and the entire subject matter (id. at 47-50 ).
INTERPRETATION AND DEFAMATORY MEANING
"Whether particular words are defamatory presents a legal question to be resolved by the court in the first instance" ( Aronson v. Wiersma , 65 NY2d at 593 ). The interpretation of allegedly defamatory words is governed by certain principles. The disputed language must be given a fair reading "in the context of the publication as a whole" ( Armstrong v. Simon & Schuster , 85 NY2d 373, 380 [1995] ). "[T]he courts are obliged to consider the communication as a whole, as well as its immediate and broader social contexts, to determine whether the reasonable listener or reader is likely to understand the remark as assertion of provable fact" ( Gross , 82 NY2d at 155 ). No effort should be made to interpret the words " ‘in their mildest and most inoffensive sense to hold them nonlibelous’ " ( November v. Time Inc. , 13 NY2d 175, 179 [1963], quoting Mencher v. Chesley , 297 NY at 99 ). Perhaps most significant, "[t]he words are to be construed not with the close precision expected from lawyers and judges but as they would be read and understood by the public to which they are addressed" ( November , 13 NY2d at 178-179 ). However, if the court determines the words used are susceptible of more than one meaning, it is for the trier of fact to determine in what sense the words were used and understood ( James v Gannett Co. , 40 NY2d 415, 419 [1976] ). In applying these principles, no emphasis should be placed on a particular interpretation (id. ).
OPINION
Under New York law, facts may be actionable, but opinions are protected. "Whether a particular statement constitutes an opinion or an objective fact is a question of law" ( Mann v. Abel , 10 NY3d 271, 276 [2008] ; Kamchi v. Weissman , 125 AD3d 142, 157 [2d Dept 2014] ; Abakporo v. Daily News , 102 AD3d at 816 ). New York courts have adopted this distinction ( Immuno A.G. , 77 NY2d 235 ; 600 West 115th Street Corp. v. Van Gutfeld , 80 NY2d 130 [1992], cert denied 508 US 910 [1993] ; Gross , 82 NY2d 146 ).
In Gross , the Court of Appeals summarized a three-part test:
1. Whether the specific language in issue has a precise meaning which is readily understood;
2. Whether the statements are capable of being proven true or false; and
3. Whether either the full context of the communication in which the statement appears or the broader social context and surrounding circumstances are such as to signal ... readers or listeners that what is being read or heard is likely to be opinion, not fact.
( 82 NY2d at 151-152 [internal quotation marks and citations omitted]; see Mann v. Abel , 10 NY3d at 276 ; Silverman v. Daily News, L.P. , 129 AD3d 1054, 1055 [2d Dept 2015] ). Separating fact from opinion in the defamation context may border on a fool's errand. The distinction is often difficult, and what constitutes a statement of fact in one instance may be viewed as a statement of opinion in another in light of the content of the communication as a whole ( Brian v. Richardson , 87 NY2d 46, 51 [1995] ["(d)istinguishing between assertions of fact and nonactionable expressions of opinion has often proved a difficult task"]; Parks v. Steinbrenner , 131 AD2d 60, 63 [1st Dept 1987] ["Determining whether particular statements or particular words express fact or opinion is ofttimes an exercise beset by the uncertainties engendered by the imprecision and varying nuances inherent in language."] ). Nevertheless, in the first instance, judges are called upon to do so with standards that provide illusory guidance.
When a person hears a statement, the instinctive reaction is to place the language used in the context of the circumstance. That reaction is followed by the statement's subject and whether it transmits information, or attitudes. Ultimately, that process leads to a determination whether the statement is one of fact or opinion. However, people rarely speak in simple, short, declarative sentences. Instead, statements are often compound, filled with adjectives and colloquial terms, and often punctuated by salty language that falls short of the "King's English." In addition, words used in different contexts can have different meanings. Thus, an allegation of fact can be an opinion, and what appears to be an opinion may be an allegation of fact. To say one is a "bum" suggests: (1) vagrancy; (2) idleness; (3) an avid actor, as a "ski bum"; (4) one who begs or borrows; and (5) one who provides false or bad advice may give a "bum steer." The context may assist in determining what was said and what was meant.
The need to separate fact from opinion exists, in the context of defamation, because the First Amendment places a premium on expressions of opinion. The First Amendment right to be a crass loudmouth, use loose language, or hurl invective, is no different than the right to speak one's mind; neither, unfortunately, can be isolated from public debate. Social standards have also evolved accepting words in public discourse that would have not been accepted a decade earlier. Politicians and public figures publicly use language once limited to immature adolescents, fraternity members, or soldiers on leave. Presidential debate "winners" have been reduced to one-line attacks or responses, rather than exchanges of ideas or debate about policy. Public discourse may become more colorful, but public debate may suffer. For better or worse, the context provides assurance that "public debate will not suffer for lack of ‘imaginative expression’ or the ‘rhetorical hyperbole’ which has traditionally added much to the discourse of our Nation" ( Milkovich v. Lorain Journal, Co. , 496 US 1, *2 [1990] [quotation marks in original] ). In this context, the belief that "fact" can be easily distinguished from "opinion" assumes a distinction that most people do not always make when expressing themselves; yet, judges must apply that judicial divining rod to find the "fact" or "opinion." Simultaneously, one must wonder if a pure opinion, separated from a factual basis, has any value. Any value it has lies in the public debate, and it is protected because its truth or falsity cannot be established, and it is nonactionable. Only "facts" can be proven false, and are therefore actionable in the defamation context.
DEFAMATION PER SE
Words that injure a person in a business or professional capacity are considered defamatory per se . Here, there can be no dispute about the words impacting Plaintiff's career in the insurance industry, and if the defamation is proven, special damages would follow ( Liberman v. Gelstein , 80 NY2d 429, 434-435 [1992] ). This outcome exists notwithstanding Plaintiff's testimony of the lack of damage to his reputation (Ex. 8 at 15, 21).
PLAINTIFF'S BURDENS
As a public figure, Plaintiff must establish the falsity of the defamatory statements ( Hepps , 475 US at 775 ). Stated simply, the falsity of the words is not deserving of protection, but until the falsity is established, the value accorded to free speech and public debate should not be infringed. Thus, the burden falls on Plaintiff ( Gertz , 418 US at 341 ). In order to protect First Amendment values, courts are obligated to scrutinize the record to ensure that any result is not "a forbidden intrusion on the field of free expression" ( Sullivan , 376 US at 285 ).
Actual malice requires the plaintiff to establish the defendant made statements he knew were false, or he made them with a reckless disregard for their truth ( Kipper , 12 NY3d at 353 ; Sullivan, 376 US at 280 ). The plaintiff must prove that the defamatory statement was made with actual malice at the time of publication ( Butts , 388 US 130 ). Further, there must be "sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his publication," or in the alternative, knew of its falsity ( St Amant , 390 U.S. at 731 ; Garrison v. Louisiana , 379 US 64, 74 [1964] [evidence must permit the conclusion that the defamatory statement was "made with [a] high degree of awareness of [its] probable falsity"] ). This burden must be established "by clear and convincing evidence," stemming from two policy considerations. One, persons who are public figures have exposed themselves to media scrutiny and a higher risk of defamatory attacks. And two, such individuals have easier access to avenues of communication and therefore, a means to protect themselves from false statements without resort to litigation. Here, public relations and media personnel are, and have been, available to the parties. Each party has authored or co-authored books about his activities and positions. For better or worse, each has an audience for his statements (Exs. 11, 17, 18, 29, 35; Exs. T, CC).
Actual malice is a subjective determination "focusing upon the state of mind of the publisher of the...statements at the time of publication" ( Kipper , 12 NY3d at 354-355 ). It can be inferred from objective facts that establish motive and/or intent, as well as negligence, which together with appropriate inferences, establish the defendant's recklessness or knowledge of falsity ( Bose Corp. v. Consumers Union of the U.S., Inc. , 692 F2d 189, 196 [1st Cir 1982], affd 466 US 485 [1984] ). Of course, the state of mind as a component of actual malice can be established by, or the aggregation of, circumstantial evidence ( Harte-Hanks Communications, Inc. v. Connaughton , 491 US 657 [1989] ; Herbert v. Lando , 441 US 153, 160 [1979] ; Tavoulareas v Piro , 817 F2d 762, 794 n 43 [DC Cir 1987] [en banc ] ). Such circumstantial evidence can include elements of ill will, spite, and motive, which, when combined with other evidence, may amount to actual malice. A defendant's statements, actions, sources, and other circumstantial evidence may provide the basis for a finding of actual malice. One would not expect a defendant to admit doubts about the truth of a statement, nor admit the making of a false statement, but the defendant's mental state gives rise to inferences upon which actual malice can be inferred. However, evidence of the defendant's state of mind years before the published statements may be of limited value or relevance ( Park v. Capital Cities Communications , 181 AD2d 192, 197 [4th Dept 1992], appeal dismissed 80 NY2d 1022 [1992], lv to appeal dismissed in part, denied in part 81 NY2d 879 [1993] [letter suggesting a four-year-old dispute is insufficient to show actual malice] ), and, "courts must be careful not to place too much reliance on such factors" ( Harte-Hanks Communications , 491 US at 668 ).
So too, the state of mind may negate malice. The investigation of criminal charges against AIG, coupled with the absence of a criminal charge against Greenberg individually, strongly suggests the absence of malice against the individual.
In addition, a defendant's failure "to investigate does not in itself establish bad faith" ( St. Amant, 390 US at 732-733 ), nor does a defendant's negligence ( Khan, 269 AD2d 74 ). While the failure to investigate before publication cannot in and of itself establish actual malice, "where there are obvious reasons to doubt the veracity" of the information, that can give rise to an inference of actual malice ( Harte-Hanks Communications, 491 US at 688 ). So too, a purposeful avoidance of the truth may support a finding of actual malice, but such purposeful avoidance requires proof of a "deliberate decision not to acquire knowledge of the facts that might confirm the probable falsity of the published statement" ( Sweeney v. Prisoners' Legal Servs. of NY, 84 NY2d 786, 793 [1995] ). "The purposeful avoidance of the truth is in a different category from mere failure to investigate" ( Harte-Hanks Communications , 491 US at 692 ). Ill will or personal animosity is not enough ( Harte-Hanks Communications, 491 US at 666 ).
THE "FRAUD" AND "FRAUDULENT" STATEMENTS
Defendant's statements that Plaintiff committed accounting fraud or engaged in a fraudulent transaction are at the core of this defamation claim. The word "fraud," or its variants, is omnipresent in trial courtrooms and public discussion, and is almost as ubiquitous as the word "reasonable," carrying with it the same flexibility that allows its meaning to be tailored to fit the occasion. The definition of fraud is as varied as its uses, but has at its core, elements of trickery, deception, lack of candor, dishonesty, and other improper and unworthy behavior. The broad reach of the term "fraud" permeates a variety of behaviors that may be civil, criminal, or both, and has, at its origin, generally an intent to obtain or utilize money or property in an illicit or deceitful manner.
"Fraud and deceit have more than one meaning, depending on the circumstances and the relations of the parties. Broadly speaking, fraud is defined as any cunning, deception, or artifice employed by one person to deceive or gain an unfair advantage to the detriment of another. Over the years, fraud has generally been defined by behavior involving intentional, false representations, and other connotations of scienter, such as willfulness, knowledge, design, and bad faith. In a general way, fraud is the gaining of an advantage to another's detriment by deceitful or unfair means. Ultimately, fraud is conduct inconsistent with fair dealing and good conscience." ( 60A NY Jur 2d, Fraud and Deceit § 1 [August 2020 Update] ). The wide meaning is designed to "embrace all deceitful practices contrary to the plain rules of common honesty" ( People v. Hanslinger , 4 AD3d 564 [3d Dept 2004] ). Thus, fraud is not limited to those offenses listed in Title K of the Penal Law or Article 23-A of the General Business Law. Commonly, it is defined as "deceit or trickery perpetrated for profit or to gain some unfair or dishonest advantage" (Webster's College Dictionary, 1991). The term's meaning may depend on its use.
In People ex rel. Cuomo v Greenberg (95 AD3d at 482-483 ), the First Department defined fraud for the purposes of the Martin Act :
"The Martin Act defines fraud as ‘any device, scheme or artifice ...deception, misrepresentation, concealment, suppression, fraud, false pretense or false promise’ (General Business Law § 352 [1] ). Fraud under the Martin Act includes all deceitful practices contrary to the plain rules of common honesty and all acts tending to deceive or mislead the public (see People v. Sala , 258 AD2d 182, 193 [1999], aff'd 95 NY2d 254 [2000] ). Executive Law § 63 (12) includes ‘virtually identical language’ to the Martin Act (State of New York v. Rachmani Corp. , 71 NY2d 718, 721 n 1 [1988] ). Both statutes have been liberally construed to ‘defeat all unsubstantial and visionary schemes ... whereby the public is fraudulently exploited’ (People v. Federated Radio Corp. , 244 NY 33, 38 [1926] ). The Attorney General need not prove scienter or intent to defraud in a civil claim under either statute (Rachmani , 71 NY2d at 725 n 6 ; see People v. Lexington Sixty-First Assoc. , 38 NY2d 588, 595 [1976] ["the terms ‘fraud’ and ‘fraudulent practices’ [are] to be given a wide meaning so as to embrace all deceitful practices contrary to the plain rules of common honesty, including all acts, even though not originating in any actual evil design to perpetrate fraud or injury upon others, which do tend to deceive or mislead"]; see also People v. American Motor Club , 179 AD2d 277, 283 [1992], appeal dismissed 80 NY2d 893 [1992] ). However, an essential element of the Attorney General's Martin Act claims is that the alleged fraudulent transactions be material, i.e., that they have more than a trivial effect on net income or shareholder equity (see TSC Industries, Inc. v Northway, Inc. , 426 US 438, 449 [1976] )."
Here, counsel have sparred over whether Martin Act fraud is implicated, or whether the element of "scienter," or knowledge, is required for an intentional act of common law fraud. While the difference between the two has some bearing on a defendant's state of mind, in the context of defamation, the dispute misses the mark. The issue of fraud is different from the issue of defamation. Beyond the hypertechnical legal analysis undertaken by counsel, the terms "fraud" and "fraudulent" are to be given everyday meanings as the terms might be heard by the viewer/listener. "The words are to be construed not with the close precision expected from lawyers and judges but as they would be read and understood by the public to which they are addressed" ( November , 13 NY2d at 178-179 ). They must also be viewed "in the context of the publication as a whole" ( Armstrong , 85 NY2d at 380 ). Here, the Appellate Division concluded the fraudulent accounting statements "have a precise meaning that is readily understood, and are capable of being proven true or false," and treated the assertions as matters of fact rather than opinion, but did not otherwise define the "precise meaning" ( 155 AD3d at 47 ). The Second Department has previously wrestled with the meaning of "fraud" and offered words of caution due to its varied meanings ( Gurda , 81 AD2d at 130 ). This Court will apply the everyday meaning described above. It is against this backdrop the Court will assess the "fraud," "committed fraud," and "fraudulent accounting" statements.
In his deposition, Spitzer also asserted the fraud as a statement of fact (Ex. 2 at 17-20, 37).
Normally, the analysis would begin with a determination whether the words are substantially true ( 155 AD3d at 41 ). It would be followed by a determination whether statements are ones of fact, opinion, or a combination ( 155 AD3d at 41-42 ), but here, the Second Department has determined they are statements of fact. Defendant does not dispute the factual assertions of the words "fraud" and "fraudulent"; indeed, he confirms it in his deposition, although there is some potential qualification (Ex 2 at 17-20, 37). The failure to assert the defense of truth does not compel the Court to conclude the words are false; Plaintiff must establish the falsity.
The plaintiff's proof must also establish whether the defendant's statements were made "with knowledge that [they were] false or with a reckless disregard of whether [they were] false or not" ( Sullivan , 376 US at 279-280 ). The "reckless disregard" must be supported by evidence "to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his publication" ( Freeman v. Johnston , 84 NY2d 52, 58 [1994] ; St Amant , 390 US at 731 ). In making these determinations, this Court is not limited to the Ferguson decision, but may consider all admissible exhibits submitted with the motion papers.
What then does Plaintiff offer to establish the "falsity" of the "fraudulent accounting" or "committed fraud" statements? He asserts that Spitzer's brief did not address the statements at issue which bear on the fraudulent accounting, Greenberg's role as an unindicted co-conspirator, Greenberg's removal as Chairman, and the paid fine. Plaintiff parses words to narrow their meaning and removes them from their context, despite citing the Second Department's admonishment against "the risk of sacrificing contextual analysis for the sake of expediency," and its emphasis on the importance of analyzing the defamatory statements in this case within the context in which each statement is made ( 155 AD3d at 46-47 ). Then, Plaintiff tries to eliminate Defendant's reliance on Ferguson because: it is not a "fair and true" report; the "rational interpretation" argument is inapplicable; and, in any event, it is not dispositive. In addition, Plaintiff ignores the initiation of the conspiracy to inflate the loss reserves in a deceptive transaction by asserting that Ferguson does not address the defamatory statements. Plaintiff further claims Spitzer's reliance on the Restatement is misplaced. Finally, Plaintiff argues that Spitzer has credibility issues, although a fact finder's disbelief of Defendant's denial of malice is not enough to deny summary judgment even when credibility is at issue ( Khan , 269 AD2d at 79 ).
Noticeably absent from this summary is any factual offering to show the statements regarding the fraudulent accountings were false, or that Spitzer knew they were false. There is no challenge to the purpose of the Gen Re transaction or the methods used. The only references are the losses were "immaterial" (Memorandum in Opposition at 12). Similarly, Plaintiff is silent about the CAPCO transaction. The Restatement is not challenged, nor is the 2006 AIG settlement or the 2009 Greenberg/Smith settlement. Plaintiff emphasizes that he neither "admitted nor denied" the allegations of the SEC complaint, but his consent to the Judgment, combined with the failure to challenge the allegations and the payment of a 15 million dollar fine, supports a conclusion of fraud for purposes of the defamation claim.
The Court does not have to re-examine all prior litigation; instead, it must focus on Defendant's statements, their context, their foundation, and their truth or falsity. In doing so, the search for accountings of the transactions that are "true" is not provided by Plaintiff; such evidence might establish an issue of fact. In contrast, there are several accountings certified by Greenberg (Ex. S). There is testimony that PwC would no longer rely on Greenberg's certifications (Ex. 53 at 101). There is the Restatement (Ex. Q), and the litigation. There is the AIG-FP litigation (Exs. L-Q), which also involved a Loss Portfolio Transfer (LPT) during Plaintiff's leadership that resulted in a 126 million dollar fine. There are the Ferguson decisions and Justice Ramos' decision in the Martin Act litigation, as well as their respective appeals. The false increase in reported loss reserves on AIG's financial statements, initiated by Plaintiff, is the equivalent of accounting fraud by Plaintiff at AIG. Defendant's statements could not possibly have produced a materially different effect on the mind of a reasonable viewer than the statement that Plaintiff was a co-conspirator in fraud who initiated the scheme (see Hepps , 475 US 767 ).
Similarly, there is no evidence offered that Defendant "entertained serious doubts as to the truth of his publication" as required for establishing that he acted with a reckless disregard for the truth. Indeed, it appears Plaintiff's objection is that Defendant disagreed with him and rejected Plaintiff's theory of aggressive, but lawful, accounting, preferring instead a conclusion that the transaction was replete with deception. The support in the record for Defendant's position negates the likelihood that he entertained serious doubts as to the truth of this publication.
Greenberg argues a variety of components that when taken together are relevant to, and support a finding of, actual malice at the time the statements were made. The elements also apply to the "removal" and "paid fine" statements, and include:
1. Spitzer's ill will toward Greenberg;
2. Evidence of motive, intent, bias and false statements (such as his absence of feelings for Plaintiff in 2012);
3. Spitzer's writings, particularly e-mails;
4. Spitzer's efforts to build his reputation at Greenberg's expense;
5. Spitzer's attempts to increase the viewing audience on Viewpoint;
6. A predetermined and preconceived plan to malign; and
7. A "purposeful avoidance" of the opportunity to correct his assertion.
It is undisputable that actual malice may be formed by the aggregation of actions, or factors, that, standing alone, would be insufficient. However, listing the criteria is different from establishing each element. Viewing the elements favorably to Plaintiff to support an inference of actual malice requires reaching a conclusion, or conclusions, that are not fully supported by the evidence, or requires taking words out of context.
For example, Plaintiff refers to emails between Spitzer and his sister in 2009, but omits reference to an email where Spitzer refuses to engage the Wall Street Journal editorial page (Ex. 28 at ES-1460). Plaintiff argues that Spitzer "repeatedly described Greenberg as one of his ‘enemies’ " (Memorandum in Opposition at 15), and the exhibits to which he refers includes references to the fact that Spitzer made enemies of those he challenged either in the private sector or in government, including Greenberg (Ex.18 at ES-2506; Ex. 29 at 163:4-6). Spitzer acknowledges the philosophical differences affecting regulatory issues of Wall Street as the basis for the characterization (Ex. 17 at 168, nn 4-7). More importantly, having written an article, op-ed, or e-mail is not enough to create an inference of knowledge of the falsity of a statement years later.
Like all statements of "facts" such as "fraud" and "fraudulent," the statements can be proven true or false. Here, the context of the words also includes elements of rhetoric and hyperbole. Plaintiff claims the accountings were proper and not fraudulent, but he offers no proof other than Martin J. Sullivan's conclusion to a hypothetical question (Ex. 61 at 129). This omission is significant, especially as Plaintiff justifies the aggressive accounting as lawful. Instead, he argues that it was improper for Defendant to rely on the Ferguson decision for a variety of reasons, including: (1) Greenberg was not a party in Ferguson and had no opportunity to examine witnesses or make arguments or otherwise participate; (2) although he was not indicted, Plaintiff was an unindicted co-conspirator; and (3) the Ferguson decision was reversed. For these reasons, and others, Plaintiff claims he was defamed when Defendant asserted it was "established" and "proven" that Greenberg engaged in fraud.
It is accurate to say that Greenberg had not been convicted, and no civil or criminal jury rendered a verdict against him, but the issue does not end there. Moreover, in the seven statements remaining at issue, only two references to Ferguson (although not named) appear — in Statement # 3 (... his accounting was fraudulent. These are the facts, read the federal judicial opinions"), and Statement # 5 ("Maria, here is the federal court opinion. Do you want to read it. Twenty-nine pages. Hank Greenberg co-conspirator in fraud"). When stated on a television program, the words "established" and "proven" are different than a judicial determination made in a courtroom, even when they are stated by a former Attorney General. Indeed, both words, in this context, are ultimately for the viewer to determine and to accept or reject. An inaccurate colloquial or hyperbolic statement is not actionable ( Greenbelt Co-op. Pub. Assn. v. Bresler , 398 US 6, 13-14 [1970] ). Spitzer claimed the fraud was proven, and Bartiromo claimed nothing had been proven; ultimately the viewer would decide.
Plaintiff offers additional arguments that apply not only to the fraud claims, but also to the "removal" and the "1.6 billion dollar fine" claims. Plaintiff is correct when he says that Spitzer's firm belief in the truth of his statements is not dispositive, but neither is it dispositive for a countervailing belief to be sufficient to establish actual malice. Thus, if Spitzer believes that fraud can occur at a large public company with the CEO's knowledge, and Plaintiff argues, for example, that fraud can occur at a large public company without the CEO's knowledge (Ex. 3 at No. 65), neither statement alone leads to the establishment of actual malice. This difference is an extension of the parties' varied views about too much, or too little, enforcement and regulation. Yet, it is not a substitute for direct, affirmative evidence that Defendant harbored doubts about the statements' truth ( Sweeny , 84 NY2d at 793 ). Similarly, differences between Defendant and Beattie in recounting seven-year-old events did not lead to a conclusion establishing actual malice. More is required.
Plaintiff attempts to support this position by referring to a portion of a parenthetical note in a draft of a book chapter (Ex. 18 at ES-2506). The full parenthetical states "Describe AIG case for San Greenberg brought to us by Warren Buffett, Berkshire Hathaway, Hank takes the fifth, walk in Central Park with Dick Beattie, tapes Hank Greenberg thrown out by Board , Company settles for 1.4 billion dollars and acknowledges accounting fraud" (emphasis added). Only the italicized language was cited by Plaintiff in his Memorandum of Law (Memorandum in Opposition at 13), and it is a somewhat misleading extract that does not connect the list to statements by Spitzer or Beattie. In addition, the entries cannot be contemporaneous as they list items out of chronological sequence that occurred at different times. The "walk in the park" occurred the day before the Board acted to remove Greenberg. The entry, at most, is circumstantial evidence requiring several inferences to tie it to an attack on Spitzer's credibility as Plaintiff suggests (Memorandum in Opposition at 13).
Spitzer's personal knowledge as a participant in the events is a factor to be considered. What he knew and did can have a bearing on the falsity of his statements, or whether he entertained serious doubts as to the truth of what he said ( Osorio v. Source Enterprises, Inc. , 2007 WL 683985, *7-8 [SD NY 2007] ). Spitzer's statement, "We brought a charge that AIG's accounting was fundamentally fraudulent. The company admitted that..." (Statement # 1), relies on the NYAG's Complaint (Ex. V), and the resolution of that action with AIG's payment of 800 million dollars to the State of New York, and 800 million dollars to the federal government.
It is not clear that this statement refers to Greenberg or should be applied to him (Chicherchia v. Cleary , 207 AD2d 855 [2d Dept 1994] ; Milkovich , 497 US at 20 ) (Statement regarding AIG "cannot reasonably [be] interpreted as stating actual facts about an individual," i.e., Greenberg).
Plaintiff maintains that it was never proven in court, admitted to, or established that the accounting was "fundamentally fraudulent" or "illegal," but he ignores AIG's settlement and its 1.6 billion dollar payment in fines and penalties. Plaintiff also ignores the fact that Spitzer did not qualify his statement to mean "in court" as Plaintiff suggests, or in a narrow legalistic sense. Plaintiff ignores the allegations in the Amended Complaint (Ex. J at ¶51), which the Appellate Division found as a matter of law were substantially true "in that the SEC did in fact charge Greenberg in 2009 in connection with, inter alia , the Gen Re transactions, and Greenberg did, in fact, settle those claims, without admitting or denying the underlying allegations, for $15 million" ( 155 AD3d at 52 [citations omitted] ).
When Greenberg settled the action, he admitted he "initiated, participated in and approved these two transactions" (Gen Re and CAPCO), and he further stated "AIG's publicly-filed consolidated financial statements inaccurately portrayed the accounting, and thus the financial condition and performance for AIG's loss reserves and underwriting income" (Ex. AA). This statement was preceded years earlier by Greenberg's certification of the accountings (Ex. S). Although Plaintiff neither "admitted or denied" the allegations in the Complaint, he also agreed "not to take any action or to make or permit to be made any public statement denying, directly or indirectly, any allegation in the Complaint or creating the impression that the Complaint is without factual basis" (Ex. Z). Spitzer was frustrated and critical of a settlement that neither "admitted or denied" the allegations in the Complaint (Ex. 2 at 189-191; Ex. 17 at 134; Ex. 25; Ex. 26), but that is consistent with his view of regulating the industry (Ex. 17 at 134-135). Allowing a person to settle a claim "without admitting or denying the allegations" is permitted under 17 CFR 202.5, but it has been the subject of criticism. The Consent Judgment determined the parties' rights and obligations. It included a disgorgement of 7.5 million dollars, and a penalty of 7.5 million dollars. This standard applies even if Greenberg believes the settlement and payment of a 15 million dollar penalty is a "nuisance payment," or is "the cost of doing business." These facts are part of Spitzer's personal knowledge and consistent with a conclusion of fraudulent accounting and fraud.
Plaintiff raises the theory of Spitzer's purposeful avoidance in not having read the Restatement, although Spitzer testified it was the fact of the Restatement that was important to the 2006 settlement with AIG (Ex. 2 at 85-88, 162). "[T]he purposeful avoidance of the truth is in a different category" from mere failure to investigate ( Harte-Hanks Communications , 491 US at 692 ). Plaintiff's theory assumes that the failure to read the Restatement is favorable to him. Without having read it, Spitzer would have difficulty claiming he relied on it to support the fraud claims. But the statements at issue do not claim that he relied on the Restatement's details at the time of the interview. Of course, much of the information about Gen Re and CAPCO in the Restatement can also be found in the complaints filed by the NYAG (Ex. V), and the SEC (Ex. R), as well as the indictment in U.S. v. Ferguson (Ex. W), Justice Ramos' decision (Ex. EE), and other exhibits. Even if Spitzer had not read the Restatement, it may be safely presumed that one of Spitzer's Assistant Attorney Generals did as part of case preparation, and the subject likely would have been discussed in the NYAG's office. To be sure, the Restatement is a relevant document and were it the only document detailing the information, the purposeful avoidance would carry much greater significance in supporting a claim of reckless disregard for the truth; but, it is neither the only document, nor the sole source of the information.
Plaintiff is correct that examples of animus, seeking personal gain through attacks, a plan to malign, and ill will, can, in the aggregate, serve to establish actual malice. So too can circumstantial evidence. Such factors can lead to a "plausible inference of recklessness," especially when accompanied by a brash, assertive personality, such as that demonstrated by the Whitehead (Exs. 49, 50), or Gravante (Ex.15 at 15:20-24), episodes. Yet, ascribing motives or asserting an "obsession" based on isolated examples spread over time, or in response to events or statements, amidst other factors and events, is easier said than done.
In addition, some caution is necessary. Communication in the public square is different from dinner table conversation. Likewise, communication between strangers is different than conversation between friends, which is also different from communication between siblings or spouses.
In response to an email from his sister about a March 2, 2009 Forbes article entitled, "Greenberg Claims He Was Deceived by AIG," and referring to a lawsuit filed by Greenberg against AIG, Spitzer commented with a hyperbolic comparison: "On cnbc this am he apparently told people that aig was fine as long as he was in charge. Kind of like Maddoff [sic] saying his fund was fine as long as he was in charge" (Ex. 28). The fact that Spitzer maintains his belief that Greenberg engaged in fraudulent behavior years after the events is indicative of nothing.
On March 17, 2009, Spitzer was asked to respond to a Wall Street Journal article (Ex. 30) that blamed him for Greenberg's ouster from AIG and set AIG on its disastrous path, effectively blaming Spitzer for AIG's then-current economic woes. Spitzer responded by stating he had refused to engage with the Wall Street Journal for several years because "they have yet to see a corporate scandal that they can't blame on the prosecutor who finds it," and restated his belief that "Hank g was the root of all the illls [sic] at aig" — a clear statement of opinion (Ex. 28 at ES-1460). Five months later, on August 10, 2009, he drafted a response to a Wall Street Journal editorial on the SEC settlement with Greenberg (Ex. 26). He also thanked an employee and a former colleague for copies of Greenberg's motion for summary judgment in the proceeding before Justice Ramos, suggesting that he was interested in the continued proceedings (Ex. 28 at ES-178-179, 1130). On April 21, 2010, there was an exchange of emails referring to parts of a film about the AIG events (Ex. 28 at ES-1345). On August 13, 2010, Spitzer commented on how the Wall Street Journal continued to defend Greenberg, and that he will "have fun responding" when he gets around to it (Ex. 28 at ES-7316). On August 23 and 24, 2010, Spitzer sent Beattie an article he wrote for Slate , and the two exchanged emails. Beattie reminded Spitzer that AIG's Board "fired Hank because the accountants Price Waterhouse, said they would no longer accept his certification of the numbers, a requirement under 404 of SOX." Spitzer thanked him and added, "I hate to keep flogging this horse, but I also feel that not responding to their effort to re-write history cedes the field to them" (Ex. 28 at ES-199). In that Slate article, Spitzer responded to the Wall Street Journal editorial, maintained his criticism of what he believed was a "damaging, anti-regulatory philosophy that has dominated the past 30 years," and opined that the cases against AIG and Greenberg "have been necessary to the vindication of justice and ethics in the marketplace" (Ex. 28 at ES-200). In October 2010, Spitzer was advised of Justice Ramos' decision, and requested a copy, anticipating "what the first dept does" (Ex. 28 at ES-178). None of these emails contained a plan to malign, the attainment of personal gain, or animus, although they echoed the prior condemnations Spitzer leveled. Much of the emails are simply Spitzer's opinions, which he remains free to assert.
Sarbanes-Oxley Act of 2002, Pub Law 107-204, 116 Stat 745 (July 30, 2002).
At the time of her 2018 deposition, Lisa Linden had known Spitzer for 24 years. She had a business relationship with him handling press and communications for his 1994 Attorney General campaign in the four-way primary (Ex. 29 at 16-17). She worked for him again in 2009, after he resigned as Governor, to assist him in moving "his life forward; to make it count in the aftermath of his resignation of the governorship," including "to, perhaps, continue to have a voice on issues and matters that mattered to him" (Ex. 29 at 18-19, 46-47). She did not recall Spitzer ever being angry in "the context of discussing Mr. Greenberg" (Ex. 29 at 162-163). She added, "The statements I recall him making about Ken Langone and Mr. Greenberg were that he, Eliot, made enemies in government. But I don't recall real hostility or anger being expressed by him about any of it. He seems to just be dismissive, you know. And I remember him saying, you know, ‘[t]he work that I did as attorney general brought about people who are angry’ " (Ex. 29 at 163).
Without proof, Plaintiff claims that Spitzer's animus intensified as Greenberg repaired his reputation; yet third parties, such as Linden, were also responsible for promoting Spitzer's public persona. These third parties also included Greenberg's allies who wrote op-ed pieces, editorials articles, etc., and thereby kept Spitzer in the limelight. Greenberg relies on another pro-Greenberg source — a Wall Street Journal editorial dated March 17, 2009, which blamed Spitzer's 2005 actions for AIG's 2009 financial woes (Ex 30). He also relies on Charles Gasparino's op-ed in the April 20, 2009 New York Post, which began with "SO maybe Eliot Spitzer did kill AIG, after all," but adding: "I'M not defending Greenberg's involvement in building up the CDS [Credit Default Swap] business, or his record in massaging AIG's earnings, which regulators say misled investors about the firm's finances. No such action should be tolerated" (Ex. 30 [emphasis added] ). An August 7, 2009 Wall Street Journal editorial once again blamed Spitzer for AIG's woes (Ex. 30). In response to an effort by Greenberg (and Howard Smith) to gain access to Spitzer's private emails through a Freedom of Information lawsuit, and upon learning that the Attorney General's office was not contesting the claims, Spitzer observed that the action was part of Greenberg's effort to "clear" his name for his "involvement with a corrupt company," and his "running a crooked company" (Ex. 31). Essentially, each party has accused the other of being "desperate to resurrect his reputation" (Ex. 31).
Greenberg suggests that he became the vehicle by which Spitzer would rebuild his reputation. He relies on a number of newspaper articles, interviews, and columns, which comprise substantial hearsay (Ex. 14). The theory that Spitzer engineered this attention for the purpose of attacking Greenberg is unsupported. In a lengthy profile for The New York Times, the issue of AIG and Greenberg was raised by the reporter, not Spitzer. The March 18, 2009 interview by Brian Lehrer on radio station WNYC concerned "AIG bonuses, CEO compensation, the New York State Budget, and other matters of the day."
This time period was the subject of numerous pieces, some of which were referred to previously, as the Nation was gripped by the economic crash. Spitzer's criticism of the Wall Street environment that enabled AIG to distribute over 180 billion dollars in bailout monies primarily to other Wall Street firms or entities such as Goldman Sachs, Bank of America, and JP Morgan Chase, occurred after Greenberg left AIG, and it cannot be said that Greenberg was singled out. Many of the articles and interviews concerned the 2009 AIG bailout, such as the March 23, 2009 interview with CNN's Fareed-Zakaria, which was introduced with the following: "... another week of outrage over Wall Street... there continues to be bewilderment about how these problems in the financial industry could have been piling up without warning..." (Ex. 14). In that context, AIG and Greenberg were discussed, as were possible regulatory changes to fix flaws in the system (Ex. 14).
Similarly, Spitzer was critical that "Bank Regulators Lacked Will, Not Power" in a six-minute segment on April 10, 2009 on National Public Radio (Ex. 14). An eight-page, undated, single-spaced Newsweek profile ("The Confessions of Eliot Spitzer") mentioned AIG once, and Greenberg as one of a series of individuals, but nothing more (Ex. 14). A Fox Business Network interview on June 17, 2009 focusing on "what happened to our economic infrastructure" contained less than one page of a discussion about Greenberg and AIG in a ten-page transcript (Ex. 14). The remaining pieces included Spitzer's August 10, 2009 reply to a Wall Street Journal editorial, his August 22, 2010 piece in Slate ("They Still Don't Get It"), and the New York Law Journal article about Spitzer's emails (Ex. 14). Greenberg's mention in these pieces was neither significant, nor was it more than that contained in a discussion of his role at AIG, nor was it any more critical of him in that role than prior statements. Spitzer's desire was to remain relevant in the public sphere following his resignation as Governor, whether through television, radio, newspapers, social media, with the aid of a publicist, and does not translate into a rebuilding of his reputation at Greenberg's expense, as claimed here. That he remains drawn to the limelight is not actionable, and his departure from public office does not carry with it a vow of silence. Certainly, the law of defamation should not be used to force individuals to silence themselves.
A final piece by Spitzer, "The Creators of the Financial Crisis Are Trying to Rewrite History," is dated August 20, 2012, after The Closing Bell interview, and is not considered.
The suggestion that Spitzer initially turned down a separate appearance on the same day as Vacco so that he would have time to prepare and plan borders on the fanciful. The first request for Spitzer to appear was made via e-mail at 2:17 p.m. for an appearance between 4:00 p.m. and 5:00 p.m. that same day (Ex. 40 at ES-2303). There is no indication that Spitzer saw the email prior to the taping. He was already scheduled to tape another show on NY 1 at 5:15 p.m. that day (Ex. 41 at ES-2308). For all his "preparation" in the interim, none of the papers he brought with him referred to Vacco. The fact of preparation and the general subject matter covering events over a 12-year period do not lend itself to the making of "certain points" when the specific subjects are not known in advance.
Greenberg also claims that Spitzer failed to avail himself of the opportunity to know the falsity of the fraud statements, and that failure supports a finding of actual malice. But, a different view of the evidence does not mean it is false. Allegations of failure to investigate or purposeful avoidance of the truth do not constitute evidence of actual malice.
Spitzer's reliance on Ferguson and other factors demonstrates the lack of a reckless disregard for the truth. Ferguson addressed several issues under the Federal Rules of Criminal Procedure. Consistent with those issues, the District Court viewed the evidence in its totality as it "must determine whether upon the evidence, giving full play to the right of the jury to determine credibility, weigh the evidence and draw justifiable inferences of fact, a reasonable mind might fairly conclude guilt beyond a reasonable doubt" ( Ferguson , 553 F Supp 2d at 149 [internal quotation marks and citations omitted] ). However, the facts contained in that decision are susceptible to more than one interpretation.
Defendant asserts his statements in reliance on the Ferguson decision were a rational interpretation of the District Court's ruling. In Ferguson , the District Court stated: (1) Greenberg initiated the conspiracy with his telephone call to Ferguson; and (2) the transaction was fraudulent ( 553 F Supp 2d at 158 ). Relying on Time Inc. v. Pape (401 US 279, 289-290 [1971] ), Suozzi v. Parente (202 AD2d 94, 102 [1st Dept 1994] ) and other decisions, Defendant suggests that even if his interpretation was incorrect, it cannot be the basis for a finding of actual malice.
Plaintiff disputes the rational interpretation theory on the ground that the District Court's Ferguson decision was not ambiguous and was not dispositive of the evidence of actual malice. The resolution of the issue requires a brief re-examination of the Ferguson decision to determine how it applies here, where neither party was a party in that case, but the issue of the Gen Re transaction is central in both actions.
The ambiguity in Ferguson was set forth by the parties' contentions rather than any specific holding. The transaction initiated by Greenberg was either a high-level brainstorming session about using accounting rules aggressively, but lawfully, or it was instead, or also, an unlawful agreement to deceive AIG stockholders by booking a no-risk transaction, which would not satisfy FAS 113 as reinsurance. The District Court's decision reflected the dispute within the limits of a motion to set aside the verdict even if the conclusion did not. That same dispute continued in the claims underlying the instant action, and it permeated the 2006 settlements by AIG of the SEC and NYAG cases, which resulted in substantial fines and penalties. The arguments parallel each other in each case, but with different purposes.
Plaintiff previously moved to allow expert testimony on the validity of the accounting processes utilized in the Gen Re transaction (see Decision and Order, dated March 6, 2020, NYSECF Document # 247 at 7, 8, 16-21).
Here, according to Defendant, Ferguson supports the proposition that Gen Re was a fraudulent transaction. Plaintiff opposes that proposition. Clearly, in this action, the parties' positions are found in the District Court decision and create the ambiguity. Plaintiff cannot agree with the District Court because it would implicate him beyond his status as an unindicted co-conspirator whose telephone call initiated the transaction and the conspiracy. Defendant relies on Ferguson to establish the fraud. In any event, Defendant's reliance on statements in a court decision does not amount to a reckless disregard ( Underwager v. Channel 9 Australia , 69 F3d 361, 368 [9th Cir 1995] ). There is enough ambiguity in Ferguson for each side to advance its respective arguments as they apply to the presence, or absence, of actual malice. Defendant may advance those facts in support of his position, which helps to establish a lack of reckless disregard for the truth or falsity of his statements.
While Defendant referred to the Ferguson decision (though not by name) on "The Closing Bell" in 2012, by that time, there were other sources of support for his claim that Greenberg's accounting was fraudulent. These sources included, but were not limited to: (1) the SEC complaint against AIG (Ex. R); (2) the SEC complaint against Greenberg and Smith (Ex. Y); (3) the NYAG Complaint (Ex. V) and Amended Complaint (Ex. 27); (4) Justice Ramos's decision and its affirmance (as modified) by the First Department (Ex. EE); (5) PwC's refusal to certify the accountings; (6) the Restatement and its language (Ex. Q); and (7) the settlement of the SEC action against Greenberg and Smith (Ex. Z). Plaintiff could argue the weight to be accorded to these sources, but there is no basis to suggest they provided unreliable information, or that Spitzer had obvious reasons to doubt what they said. On the contrary, they provided reasonable grounds to make claims about the accountings.
In summary, with respect to the accounting statements (Nos. 1-3, 5, 6), the following conclusions may be drawn. Statement #1: "We brought a charge that AIG's accounting was fundamentally fraudulent" is a true statement as the Amended Complaint alleges fraudulent transactions. In addition, Greenberg has not established that it applies to him, or that it is defamatory as applied to him.
Statements #2, 3 and 5 assert Greenberg's accounting was fraudulent. The authorship of the accounting prior to the Restatement contained a certification executed by Greenberg (Ex. S). Those accountings contained the required information of the Gen Re and CAPCO transactions. To the extent that such information relating to Gen Re and CAPCO was the product of deception, trickery or a methodology to inaccurately portray the financial health of AIG, or the benefits of the AIG and CAPCO transactions, then the term "fraudulent" applies, as substantially true. Plaintiff has not established to the contrary. In any event, it is a claim that is well-supported and cannot be characterized as a reckless disregard of the truth.
Statement #6 asserting "Hank Greenberg at AIG committed fraud" falls under the same umbrella for the same reasons. It is noted that the term "committed fraud" need not meet the level of proof required in a courtroom, but can be, and should be, given a meaning understood by the average viewer/listener.
In addition, Statements #1, 2, 3, 5, and 6 find support in the exhibits submitted, including:
1. The initiation of the conspiracy with Greenberg's October 31, 2000 telephone call to Ronald Ferguson;
2. 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;
3. The Restatement language regarding Greenberg's actions;
4. Greenberg's settlement with the SEC in 2009, including the language of the Judgment entered on consent, and Greenberg's statement at the time of settlement, together with his payment of 15 million dollars in fines and penalties;
5. The AIG-FP litigation (Exhibits L-Q) detailing a transaction similar to Gen Re with minimal or non-existent risk transfer, and the imposition of substantial penalties to which AIG, under Greenberg's leadership, consented;
6. AIG's settlement with the SEC and the payment of 1.6 billion dollars in fines and penalties;
7. The transaction contained no risk for AIG, in contrast to the permissible amount of minimal risk;
8. A deceptive offer letter intentionally designed to make it seem as if Gen Re solicited the deal rather than AIG;
9. The payments would be made through subsidiaries so as to appear unrelated;
10. 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;
11. Each party structured the deal for accounting purposes in an asymmetrical manner to avoid "reporting problems" or the scrutiny of regulators;
12. 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);
13. Gen Re made no claims and AIG paid no claims; and
14. The transaction was premised on strict confidentiality.
Finally, Statement #4 is a republication of a statement made on the ABC-TV's news show "This Week" on April 10, 2005. Apparently, it was not thought to be defamatory in 2005 as Plaintiff took no action. The combination of opinion and hyperbole masks the fact that the content is directed at AIG, and although it does not mention Plaintiff by name, the context would serve to include Plaintiff. The remaining content is duplicative and simply summarizes Defendant's position. Insofar as Plaintiff is characterized in opinion and hyperbole, Statement #4 is not defamatory.
REMOVAL STATEMENTS
In the seven statements alleged to be defamatory, the subject of Greenberg's removal is raised three times. They are:
1. "The company's board removed Hank Greenberg" (Statement #1, Amended Complaint at ¶20);
2. "Hank Greenberg was ‘thrown out’ by his own board" (Statement #3, Amended Complaint at ¶22); and
3. "...AIG was being led by a CEO whose accounting was fraudulent. That's why the board removed him" (Statement #5, Amended Complaint at ¶26).
As the Appellate Division recognized, it is not the removal from office or position that is defamatory, but the insinuation of misconduct that makes the removal defamatory ( 155 AD3d at 48 [citations omitted] ). The misconduct stems from the accountings and the Gen Re and CAPCO transactions. There are two events involved here: (1) Greenberg's termination as CEO of AIG on March 14, 2005; and (2) Greenberg's retirement as Chairman on March 28, 2005. According to Beattie, the March 14th termination arose because PwC would not certify the accuracy of the financial statements prepared by Greenberg, and Greenberg indicated, contrary to company policy, that he would assert his Fifth Amendment privilege and refuse to answer questions about his actions (Ex. GG at 47, 49). Each of these events, standing alone is clearly suggestive of impropriety, bordering on illegality, and falling within the description of "misconduct." And taking these events together, AIG's Board had a legitimate, good-faith basis to believe misconduct had occurred, which led to Greenberg's termination as CEO. Contrary to a policy Greenberg established, his refusal to cooperate in an investigation of the challenged financial statements provided a valid basis for inferring that Greenberg's actions were "fraudulent," especially since Greenberg, as CEO, was responsible for certifying the accounting. He had signed the accountings from 2000-2003. That his representations in the 2005 accounting were no longer accepted compelled the Board to take action, and the subsequent Restatement supports that. PwC's position regarding the accounting reflected a recent change, providing the basis for the Board's action.
After the Board voted, Beattie and Zarb telephoned Greenberg to advise him of the Board's action, and they indicated a willingness to phrase it in a way that was positive to Greenberg (Ex. GG at 61-62; Ex. HH at 2). The Board's Minutes and press releases do not dwell on the misconduct issue, but the Minutes contain the following: "Mr. Winograd explained the auditor's specific responsibility to deal with any potential illegal acts or irregularities, and that they cannot sign off pending the results of an investigation and the issue cannot be cured by disclosure" (Ex. 58 at 5). Greenberg was very angry and upset at the Board's action (Ex. U at 507-508).
Two weeks later, submitting a retirement letter on behalf of Greenberg, David Boies accepted the removal and expressed "great affection and admiration for the current members of the AIG Board and he [Greenberg] believes that they, like him, must put the interests of AIG and its shareholders above any personal interests" (Ex. 60 at 2). Thus, it is undisputed that the Board removed Mr. Greenberg. Further, at the time of his departure, the accountings were questioned, and even if not "proven" to be irregular, their impact on the company's financial health and its stock value was called into question.
Greenberg believes that Spitzer, not PwC, forced the Board to act (Ex. 8 at 179), under threat of indictment, out of an animus directed against him. However, the evidence of such a threat is scant. No specific threat against Greenberg has been established. Instead, there is a statement that AIG's conduct "could be criminal" (Ex. 46 at 10:51:23), and witnesses were summoned before the Grand Jury one month later (Ex. 47). Spitzer's acknowledgment that "he raised the possibility of filing criminal charges against AIG" (Ex. 3 at No. 40) does not amount to a threat, but does reflect a "hardball" litigation posture and style that is not unique to Defendant. Nor do these statements point to Greenberg as the reason. Similarly, neither Board Members Cohen nor Hills identified the source of the perceived threat (Ex. 6 at ¶12; Ex. 7 at ¶16; Ex. 56 at 78-79). Cohen was not even aware of the Gen Re and CAPCO transactions prior to the March 13th Board meeting, and if a fear of indictment was part of the discussion at that time, Beattie made clear to the Board that no such statement or threat was made by Spitzer to him (Ex. 22 at 255; Ex. 63 at 74-78; Ex. 65). The expressed concerns about the events involving Enron and WorldCom may have been in the Board members' minds, but that cannot be attributed to Spitzer (Exs. 55, 56). Whether Greenberg was "forced out" by Spitzer or removed by the Board may be, at most, a matter of opinion rather than an objective fact ( Dworin v. Deutsch, 2008 WL 508019 [SD NY 2008] ). Also, the circumstances that led Greenberg to retire as Chairman two weeks later cannot be verified objectively as they depend on the subjective influence on Plaintiff's thought processes, at least as evidenced by Boies' letter.
At one point, Spitzer told Beattie he was "going to indict the company," not Greenberg. (Ex. 11 at 240). At the time of the statement, Greenberg had already been terminated. Plaintiff conflates two separate episodes with this misstatement. One was the termination on March 14, 2005, and two was the document removal/destruction episode in Bermuda on March 27th (see n 6, supra ). The potential removal or destruction of documents very likely would have resulted in an indictment of AIG, based on the history of the Arthur Andersen accounting firm.
Finally, the use of the phrase "thrown out" may be viewed as "[the use] of epithets, fiery rhetoric or hyperbole" ( Steinhilber v. Alphonse , 68 NY2d at 294 [internal quotation marks and citations omitted] ). The phrase "thrown out" was framed by the use of the word "removed" twice within a brief time span on "The Closing Bell" to convey the same idea. Thus, the Court concludes that the statements concerning "removal" are not defamatory.
THE PAID FINE STATEMENT
Plaintiff asserts the statement "He paid a fine of 1.6 billion dollars" is defamatory. Factually, Greenberg paid fines and penalties totaling 15 million dollars, and AIG paid fines and penalties of 1.6 billion dollars. Defendant asserts the reference to 1.6 billion dollars was a "slip of the tongue," which was not brought to his attention and not corrected. The fact of the fine is a true statement. In essence, Plaintiff is haggling over either the misidentification, or the amount, of the fine, and whether it is defamatory, but he provides no basis to determine what amount is defamatory and what is not. Earlier in the program, Spitzer correctly identified AIG as the payer of the larger amount. There is no indication Greenberg was harmed by this statement, or held in disrepute. Plaintiff has not established that the statement was made with actual malice, or that it was a component of actual malice. Any ambiguity as to the threshold amount of payment necessary to be considered defamatory is a matter of opinion. Greenberg ran AIG for almost 40 years, he was the company's persona, and there is an element of interchangeability between them. Indeed, at an appearance before Justice Lubell, Greenberg's attorney made a similar slip when he said, "AIG did pay a 1.6 million dollar payment," though he immediately corrected himself (Appellate Division Record on Appeal, March 3, 2014 Transcript of Oral Argument at 65 [Lubell, J.] ). An erroneous statement is inevitable in a free debate ( Sullivan , 376 US at 271-272 ). Accordingly, in the absence of proof to the contrary, the Court concludes that the statement was a "slip of the tongue."
A separate fine was paid to the State of New York upon settlement of the NYAG case in 2017, and is not considered here.
CONCLUSION
Plaintiff has failed to present evidence upon which a reasonable jury could find actual malice by clear and convincing evidence. The burden is an extremely high one, and it has not been met. It is not met by disbelieving Defendant's testimony, nor is it met by suggesting Defendant must have known, should have known, or could have known a statement was false, or was made with a reckless disregard for the truth. Plaintiff has an affirmative duty to establish actual malice; that duty is not met simply by posing an alternative factual theory. The support in the record for Defendant's statements negates the conclusion that they were made recklessly. This conclusion is reached with the recognition that public debate is not measured by gentility. Instead, it is measured by "the principle that debate on public issues should be uninhibited, robust, and wide-open, and that it may well include vehement, caustic, and sometimes unpleasantly sharp attacks" ( Sullivan , 376 US at 270 ). Judgment for a defendant is mandated when the record is "of insufficient caliber or quantity to allow a rational finder of fact to find actual malice by clear and convincing evidence" ( Anderson v. Liberty Lobby , 477 US at 254 ).
Accordingly, it is hereby
ORDERED Defendant's motion is granted, and the Amended Complaint is dismissed.
The foregoing constitutes the Decision and Order of the Court.