By Karen Freifeld

NEW YORK (Reuters) - Former American International Group <AIG. N> Chief Executive Maurice "Hank" Greenberg on Thursday won a short reprieve from New York's case accusing him of orchestrating sham transactions at AIG.

State appeals court Associate Justice David Friedman granted Greenberg's request to halt pre-trial proceedings in the case until a panel of the court can consider his request.

The ruling is the latest twist in an eight-year old case in which the New York attorney general is seeking to hold Greenberg accountable for allegedly improper accounting at the insurance giant.

Friedman's decision will only be in effect for a couple of weeks, until a full appeals court panel decides whether to postpone the case while it decides whether to remove the judge overseeing the case, Justice Charles Ramos.

Greenberg claims that Ramos is biased against him. His lawyers asked the judge to recuse himself. But last week, the judge refused to do so.

The former CEO now wants the appeals court to reverse Ramos's decision to keep himself on the case.

Greenberg's lawyers argue Ramos has at least created the appearance of partiality, prejudging the case in a way that would preclude him from presiding over a fair trial. They also claim he has made decisions based on inadmissible evidence.

Attorney David Boies, who represents Greenberg, said in a statement that his client was pleased the appeals court judge agreed to hold up the proceedings.

"However," Boies said, "we are troubled by the attorney general's decision to continue pursuing this litigation."

Boies said that "no legitimate public purpose justifies the expenditure of taxpayer resources" on the lawsuit.

Greenberg's lawyers have argued the case should have ended in April, when New York Attorney General Eric Schneiderman dropped a claim for damages in the case.

Schneiderman is now seeking to have Greenberg and his co-defendant, former AIG Chief Financial Officer Howard Smith, banned from the securities industry and from participating as officers or directors of public companies.

Matt Mittenthal, a spokesman for Schneiderman, declined to comment on Thursday's ruling.

The lawsuit accuses Greenberg of overseeing a $500 million transaction with reinsurer General Re Corp that misled AIG shareholders, and another, similar transaction.

Greenberg led AIG for nearly four decades before he was ousted in 2006. The following year, AIG paid $1.64 billion to settle state and federal probes into its business practices.

The case is New York v Greenberg, et al, New York state Supreme Court, New York County.

(Editing by Eric Walsh)

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