NEW YORK (Bloomberg) — Former American International Group Inc. chairman Maurice (Hank) Greenberg may be sued by US regulators for his alleged role in a sham reinsurance transaction that led to five criminal convictions.

Greenberg, 83, received a so-called Wells notice from the US Securities and Exchange Commission last week, his spokesman Glen Rochkind said yesterday. The notice means the SEC may seek an enforcement action against Greenberg, who was replaced in 2005 amid accounting and sales probes of the world's largest insurer.

"It's a stark reminder that years of silence from the commission doesn't mean an enforcement action is unlikely," said Jacob Frenkel, a former SEC enforcement lawyer now at Shulman Rogers Gandal Pordy & Ecker in Rockville, Maryland. "A much anticipated case becomes closer to reality."

Greenberg, identified by US prosecutors as an unindicted co-conspirator in the transaction with Berkshire Hathaway Inc.'s General Re Corp., hasn't been criminally charged and says he did nothing wrong. Four former executives of General Re and one of AIG were convicted in February of using the transaction to help AIG deceive investors. It artificially inflated reserves by $500 million in 2000 and 2001.

Greenberg said yesterday that the defendants turned to fraud "to get the deal done" after they were unable to complete the legitimate transaction he sought. The SEC sued the five as well as AIG in 2006. Ultimately the insurer agreed to pay more than $1.6 billion to settle state and federal claims of improper accounting and bid rigging. "We remain confident of our position," Greenberg's lawyer, Robert Morvillo, said in a statement about the Wells notice. The probe has been narrowed, Morvillo said, and "we believe that none of the remaining issues are material to AIG's financial statements". The notice gives Greenberg an opportunity to try to dissuade regulators from proceeding with a case against him.

SEC spokesman John Heine and AIG spokesman Chris Winans declined to comment. AIG is the largest insurer by assets.

Secret oral side agreements corrupted a written deal, letting AIG book fraudulent reserves implying a risk of loss, prosecutors said in the criminal trial. AIG should have booked a no-risk deposit, as General Re did, they said.

Last week the federal judge who presided over the criminal trial said there was enough evidence for a jury to conclude the conspiracy began with a phone call from Greenberg to former General Re CEO Ronald Ferguson, one of those convicted.

In an opinion upholding the convictions, US District Judge Christopher Droney wrote that prosecutors presented "sufficient evidence" that "starting with Greenberg's October 31, 2000, phone call to Ferguson, there was an agreement to carry out a transaction to artificially inflate AIG's loss reserves and deceive AIG's investors".

In addition to Ferguson, General Re chief financial officer Elizabeth Monrad; Christopher Garand, a former senior vice-president at General Re; former General Re assistant general counsel Robert Graham; and Christian Milton, AIG's former head of reinsurance, face prison sentences.