After negotiations spanning about two months, the settlement was a quiet conclusion to a case that began during an era when Mr. Spitzer extracted large fines after accusing Wall Street research analysts of publishing biased research, mutual fund managers of shady trading and insurance brokers of rigging bids and receiving kickbacks. The Enron and WorldCom accounting frauds had shaken corporate boards.
But Mr. Greenberg was determined to fight his case, and both sides dug in for a long battle. Neither Mr. Greenberg nor Mr. Spitzer have the same jobs they had in 2005, having receded from those prominent roles.
The trial began in September before New York State Supreme Court Justice Charles E. Ramos after 11 years of delays and legal maneuvering, much of it as Mr. Greenberg appealed rulings by the judge. After his testimony and cross-examination in the trial, Mr. Greenberg and the lawyers arguing for the state began mediation in December. The trial had been set to resume last month, but was postponed pending the talks.
The former executives were accused of overseeing two sham reinsurance deals aimed at duping A.I.G. investors. One deal turned auto warranty insurance losses into investment losses; the other inflated A.I.G. reserves by $ 500 million. The charges led to Mr. Greenberg's ouster in 2005 as chief of A.I.G., which he had built into a global insurance leader.
In a statement on Friday, Mr. Schneiderman said, "Today's agreement settles the indisputable fact that Mr. Greenberg has denied for 12 years: that Mr. Greenberg orchestrated two transactions that fundamentally misrepresented A.I.G.'s finances."
In his statement, Mr. Greenberg said he "initiated, participated in and approved these two transactions"; as a result, A.I.G.'s public filings "inaccurately portrayed the accounting, and thus the financial condition and performance for A.I.G.'s loss reserves and underwriting income."
In an interview, David Boies, Mr. Greenberg's lawyer, called the agreement a "nuisance settlement," noting that Mr. Greenberg had avoided two penalties sought by the state that would have barred him from working in the securities industry or as an officer of a public company. The settlement's outline was framed by the mediator, Kenneth R. Feinberg.
The transactions were featured when A.I.G. settled accounting fraud charges brought by the Securities and Exchange Commission in 2006. One, a reinsurance deal between A.I.G. and General Reinsurance Corporation, a company owned by Berkshire Hathaway, prompted federal criminal charges in Connecticut against several former executives of the companies; two former Gen Re executives pleaded guilty. A 2008 jury verdict against five others was overturned on appeal.
What began as a Spitzer-Greenberg battle was nasty from the start. Before he brought the charges in May 2005, Mr. Spitzer had forced the ouster of Mr. Greenberg's son Jeffrey as chief executive of the insurance brokerage Marsh & McLennan after charging it with bid-rigging and receiving kickbacks. And Mr. Greenberg complained that Mr. Spitzer was treating minor infractions, like "foot faults" in tennis, as capital crimes. Mr. Spitzer shot back, "too many foot faults, and you can lose the match."
Early in the trial, Mr. Greenberg admitted to a sometimes active role in formulating the transactions at issue but insisted he had intended for them to comply with accounting rules. He said he had left most details to subordinates.
On the stand, he lunged and parried with state trial lawyer David E. Nachman, avoiding simple answers so often that the judge chided him. "If we don't want this trial to last a year, you're going to have to give direct answers," Judge Ramos said.
In his opening statement, Mr. Boies said, "this case is devoid of any admissible evidence that ties Mr. Greenberg to anything that was improper about these two transactions."
Saule Omarova, who specializes in the regulation of financial institutions as a professor at Cornell Law School, said the case was about the legacies of Mr. Greenberg as A.I.G.'s longtime leader and Mr. Spitzer as a onetime prominent Wall Street regulator.
Stepping back, she said, the case is a prominent example of regulators' efforts to untangle the blame for "risk-creating activities at large financial conglomerates" that later loomed large in the financial crisis of 2008.
Three years after the charges led to Mr. Greenberg's ouster, A.I.G. nearly collapsed and needed an $ 185 billion federal rescue. Mr. Spitzer resigned as New York governor in 2008 in a prostitution scandal.
The state and the two defendants had reached an agreement to settle the case just before A.I.G.'s near-collapse. However, a steep drop in A.I.G.'s stock price at that time reduced the value of a planned charitable donation of A.I.G. shares that would have been part of the settlement, and the agreement was called off.
Before the trial, Judge Ramos ruled in favor of the state on one of the charges, but that was overturned on appeal, and the defense unsuccessfully sought to remove him from the case.
In the Gen Re deal struck in 2000, the company was supposedly paying $ 10 million to get reinsurance from A.I.G., according to testimony by Christian M. Milton, a former A.I.G. executive. But A.I.G. arranged to repay the $ 10 million to Gen Re with a $ 5 million deal fee, he testified.
The state charged that the "secret" fee repayment was a sign the reinsurance was bogus, intended mainly to allow A.I.G. to increase reserves by $ 500 million. But Mr. Greenberg, who initiated the deal by phoning the Gen Re chief executive, testified that he was not aware of the repayment plan.
In a 2008 deposition admitted into evidence early in the trial, Alice Schroeder, a former Morgan Stanley insurance analyst, said that if she had known about the Gen Re transaction and its impact in raising A.I.G.'s then-faltering reserve levels, she "almost certainly" would not have upgraded the stock in early 2001. She also described Mr. Greenberg as "a very hands-on manager."
One cloud over the state's case was whether a deposition of Richard Napier, a former Gen Re executive, could come into evidence. Mr. Napier was an important prosecution witness in the Connecticut trial who in 2005 pleaded guilty to conspiring to commit securities fraud in the A.I.G. deal.
While the defense objected to parts of Mr. Napier's deposition as inadmissible "hearsay," New York State lawyers argued that a "co-conspirator exception" to hearsay rules should apply. Judge Ramos received briefs on the issue but had not ruled before the mediation effort began.
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