NEWYORK (Bloomberg) ? Former American International Group Inc. Chief Executive Officer Maurice ?Hank? Greenberg may use the insurer?s reliance on professional advice as his legal defence of accounting improprieties that prompted a $3.9 billion earnings restatement, former prosecutors said.

Greenberg, who faces allegations of securities fraud, last week told a gathering of current and former AIG employees that the New York-based company?s accounting for executive compensation, which was ultimately corrected, hadn?t been questioned by outside lawyers and auditors when he was in charge, said a person who attended the meeting. It was at least the fourth time Greenberg or his lawyers have pointed to receiving expert advice since he was forced to resign in March.

?If you can demonstrate that an accounting procedure was approved by outside accountants or approved by outside attorneys, that can be a viable defence,? said Robert Mintz, a former federal prosecutor who now practices at McCarter & English LLP in Newark, New Jersey.

AIG?s auditor, PricewaterhouseCoopers LLP, said Greenberg and former Chief Financial Officer Howard Smith omitted and altered information, leading to the correction of an array of accounting abuses in May. Greenberg, who spent almost 40 years building AIG into the world?s largest insurer, faces a civil lawsuit by New York Attorney General Eliot Spitzer and is being investigated by the US Department of Justice and the Securities and Exchange Commission.

Greenberg?s latest defence of AIG?s accounting was last Thursday at the annual shareholders? meeting of C.V. Starr & Co., an insurance brokerage affiliated with AIG that he still controls. About 50 current and former AIG executives attended the meeting at New York City?s Lotus Club, said the person, who declined to be identified.

At the meeting, Greenberg specifically took issue with AIG?s decision to expense incentive compensation paid by Starr International Co., another company he runs, the person said. Correcting that accounting contributed $496 million to the $3.9 billion reduction in net income.

Greenberg, 80, and Howard Opinsky, a spokesman for his attorneys, declined to comment, as did PricewaterhouseCoopers spokesman David Nestor, SEC spokesman John Heine, Justice Department spokesman Bryan Sierra, and AIG spokesman Chris Winans. Spitzer spokesman Darren Dopp didn?t return phone calls.

AIG?s stock fell 64 cents, or 1.1 percent, to $60.57 at in New York Stock Exchange composite trading yesterday morning. The shares have fallen 17 percent since the company announced accounting subpoenas from Spitzer and the SEC on February 14.

Greenberg?s comments on compensation follow broad statements he and his lawyers have made about relying on the advice of accounting experts. Other portions of the restatement stemmed from improper reinsurance contracts that understated liabilities for claims. AIG also said insurance underwriting losses were made to look like less-scrutinised investment losses.

?It is clear that the restatement entails hindsight analysis about complicated accounting issues which were originally made on a good faith basis both by management (former and present) and AIG?s auditors without objections or inquiry from the board or any member of the board,? Greenberg wrote in a letter to AIG?s board publicised by his attorneys in May.

To use the professional-advice defence, Greenberg would have to show he relied on lawyers and accountants willing to stand up to him, said John Moscow, a former chief of investigations in the Manhattan District Attorney?s office.

?If there are times he can point to where they didn?t let him do things he wanted, the argument he relied on professionals becomes much stronger,? Moscow said.

Greenberg would also have to prove his advisers had all the pertinent information, said David Gourevitch, a former SEC enforcement lawyer now in private practice in New York.

?You can?t tell half the story, then get their opinion and claim to rely on it,? Gourevitch said.

Greenberg told the C.V. Starr audience that his attorneys are preparing ?white papers? refuting the restatement that will be given to federal regulators soon, the person said. David Boies, one of his lawyers, said in a July 1 interview that although Greenberg disputed Spitzer?s allegations, he might be willing to negotiate to settle the suit.

Shifting the focus to outside professionals may make those negotiations more difficult.

?It?s not a smart strategy and all it does is antagonise the regulators,? said Jacob Zamansky, an attorney in New York whose 2001 claim against Merrill Lynch & Co. sparked Spitzer?s probe of biased Wall Street research. ?Irrespective of the professionals, executives have a duty to follow the law and do it appropriately?.