NEW YORK (Bloomberg) ? New York Attorney General Eliot Spitzer's office said he won't press criminal charges against Maurice (Hank) Greenberg, the former chief executive of American International Group Inc., eliminating a possible complication in defending Spitzer's civil suit against him.

Spitzer sued Greenberg, 80, and New York-based AIG in May, alleging the world's biggest insurance firm used accounting tricks to mislead regulators and investors. Spitzer's spokesman Darren Dopp said last week the state isn't pursuing criminal charges against Greenberg, who left AIG in March.

The decision could make it easier for Greenberg to defend the civil case without worrying about information in that case being used in a criminal case against him, an ex-prosecutor said.

"Assuming that this case ultimately is handled completely along civil grounds, it makes defending the case much easier, because Greenberg's lawyers no longer have to weigh the benefit of responding to the civil case against the possibility that that response can be used against him in some future criminal prosecution," said former federal prosecutor Robert Mintz.

"There's still the prospect of a looming federal criminal case that has to be factored into any strategic decision by Greenberg's defence team. But certainly they are breathing a huge collective sigh of relief."

Dopp said Spitzer's decision was made "months ago."

"It has to do with intent, the strength of the evidence and applicable laws," he said. The story was reported earlier today by the Wall Street Journal.

The Securities and Exchange Commission, the Justice Department and Spitzer's office have been investigating Greenberg and AIG over transactions that hid losses and understated liabilities at AIG.

In May, Spitzer was presenting evidence to a New York grand jury considering possible criminal charges in an investigation of AIG, according to people familiar with the matter. Spitzer said in April that he didn't plan to bring criminal charges against AIG itself because the company's board was cooperating with his investigation.

Also in April he told ABC news that his office might pursue criminal or civil charges against Greenberg.

AIG spokesman Chris Winans declined to comment, as did Howard Opinsky, a spokesman for Greenberg's attorneys.

Spitzer's suit against AIG and Greenberg said Greenberg repeatedly ordered subordinates to skirt a broad slate of accounting rules. AIG also used fake offshore reinsurance transactions to inflate the size of its reserves for claims and hide auto-warranty insurance losses, Spitzer said.

Spitzer also accused Greenberg of initiating a deal with Berkshire Hathaway Inc.'s General Re Corp. unit, the largest US reinsurer, to inflate AIG's reserves by $500 million. The transaction was conducted to appease analysts concerned about a reserves shortfall and was improper because AIG took on no risk, Spitzer alleged.

"There's no other way to read this decision than to conclude that Spitzer's office thought there was not enough evidence to sustain a criminal prosecution," said Mintz, the ex-prosecutor, who is now a partner at McCarter & English in Newark, New Jersey. "It suggests that this case is far less clear cut than perhaps prosecutors initially thought."

In June, two former General Re executives pleaded guilty to federal criminal charges that they helped AIG manipulate its results.

AIG in May lowered the past five years of earnings by $3.9 billion to correct its accounting, while blaming the restatement on members of former senior management. Greenberg has contended that much of AIG's restatement was unnecessary and driven by fear of regulators.

AIG earlier pledged to resolve the suit with Spitzer, and Greenberg's lawyers have said he will fight the allegations.

Shares of AIG fell 20 cents to $68.87 in New York Stock Exchange composite trading.