Wednesday, April 13, 2005

Do You Trust Your Wife?

In The Shawshank Redemption, prisoner Andy Dufresne overhears sadistic Captain Hadley complaining about having to pay taxes on lottery winnings and asks the Captain, "Do you trust your wife?"  After nearly being thrown off a roof, Dufresne explains how Hadley can avoid taxes by giving the winnings to his wife, assuming he trusts her.  On March 11, just three days before resigning as CEO of AIG, Maurice Greenberg gave his wife Corinne 41,399,802 shares of AIG stock, worth approximately $2.2 billion (SEC Form 4 here and explanatory rider here).  Greenberg has since resigned as chairman of AIG's board, although he remains in control of two off-shore companies that own a substantial block of AIG shares.  There has not been any statement of the reasons for gift, and the usual reasons for transferring shares (estate planning, diversification, etc.) would not apply to a spousal gift of the shares, as best I can tell.  Is the transfer designed to keep the shares away from claimants in the civil securities fraud and derivative cases that abound, or perhaps even a criminal case? Needless to say, I haven't gotten my wife anything nearly this expensive in quite a while.

Greenberg met yesterday with government investigators from four agencies (NY Attorney General, SEC, DOJ, and NY Insurance Commission) and invoked his Fifth Amendment privilege over 100 times (see NY Times story here).  While the usual practice in criminal cases is to permit a blanket assertion of the privilege without requiring the witness to appear, in civil cases the government can use the person's refusal to answer as evidence (albeit not conclusive proof) of a violation by permitting a jury to draw an inference that the person's answer would have been incriminating regarding the subject of the question.  If the question is not asked, then no inference about its subject matter can be drawn.  Assertion of the Fifth Amendment at this point does not prevent Greenberg from testifying down the road.  In asserting the Fifth Amendment, Greenberg is reported to have stated that the he needed more time to prepare for the deposition under oath.  While it is not the "privilege to get more time to prepare," it is unlikely the government could challenge the assertion of the Fifth Amendment, especially because the presence of the DOJ investigators at the deposition clearly indicates a criminal component to the case. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/04/do_you_trust_yo.html

Investigations, Securities | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef00d83545293f69e2

Listed below are links to weblogs that reference Do You Trust Your Wife?: