Saturday, May 21, 2005

New York Begins Grand Jury Investigation of AIG Executives

A Wall Street Journal article (here) reports that N.Y. Attorney General Eliot Spitzer's office has begun presenting evidence to grand jury about possible criminal violations by former American International Group executives in connection with accounting issues at the insurance company.  The targets of the investigation at this point are most likely former CEO Maurice Greenberg and former CFO Howard Smith, although other AIG executives have left the company after asserting the Fifth Amendment and their conduct probably will be part of the grand jury's investigation.  Joseph Umansky, who is head of AIG's reinsurance division that is a principal focus of the investigation, has testified before the grand jury and received immunity (see earlier post here). 

Under New York law, a witness who testifies before a grand jury automatically receives immunity (subject to certain exections), which is quite different from the federal system that requires a witness to testify and assert the Fifth Amendment if there is possible incrimination, but immunity is solely at the discretion of the Department of Justice.  Another important difference is that the immunity granted under New York law is transactional immunity, i.e. the state cannot prosecute the person for any crime discussed in the testimony, while the federal government pretty much only grants the more limited "use/fruits" immunity that prohibits the use of the testimony in a subsequent prosecution and (more importantly) any information derived from it to prosecute the witness -- unless one happens to be dealing with the Ken Starr Independent Counsel's office, but that's another story.  New York CPL 190.40 (here) provides:

1.  Every witness in a grand jury proceeding must give any evidence legally requested of him regardless of any protest or belief on his part that it may tend to incriminate him.

2.  A witness who gives evidence in a grand jury proceeding receives immunity unless:
  (a)  He has effectively waived such immunity pursuant to section 190.45; or
  (b)  Such evidence is not responsive to any inquiry and is gratuitously given or volunteered by the witness with knowledge that it is not responsive.
  (c)  The evidence given by the witness consists only of books, papers, records or other physical evidence of an enterprise, as defined in subdivision one of section 175.00 of the penal law, the production of which is required by a subpoena duces tecum, and the witness does not possess a privilege against self-incrimination with respect to the production of such evidence.  Any further evidence given by the witness entitles the witness to immunity except as provided in subparagraph (a)
and (b) of this subdivision.

What remains unclear is whether there is any coordination between Spitzer's office and the U.S. Attorney for the Southern District of New York on the investigation.  A "race to the courthouse" could have a negative effect on any prosecution ("act in haste" and all that). (ph)

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Grand Jury, Investigations, Prosecutions, Securities | Permalink

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