NU Online News Service, June 23, 9:38 a.m. EDT

NEW YORK–The trial judge presiding over the stock ownership battle between American International Group and Starr International Company said he doubts AIG can prove its case.

During a break with the jury out of the room U.S. District Court Judge Jed D. Rakoff said AIG attorneys will have to present better evidence to substantiate their case against SICO.

AIG is suing its former privately owned partner SICO over control of AIG stock worth $4.3 billion in 2005.

The insurance conglomerate is also suing SICO for breach of faith for its handling of a deferred compensation program for a select group of employees under the SICO and AIG umbrella. The payments were made with a portion of the profits SICO made from its holdings of AIG stock.

Yesterday was the fifth day on the witness stand for former AIG Chairman and Chief Executive Officer Maurice R. Greenberg, who was forced out of AIG in 2005. Mr. Greenberg, while leaving AIG, continued as chairman of SICO and presided over its split from AIG shortly after he left the company.

Judge Rakoff questioned the direction of AIG attorney Theodore Wells' line of questioning, saying that in going over past testimony in an effort to impeach Mr. Greenberg's testimony, he has not shown how speeches the former executive gave concerning the deferred compensation plan legally bind SICO to continuing the program.

"Whether [the program] was discontinued unilaterally or by mutual agreement…I doubt it would be a legally enforceable act," Judge Rakoff said about SICO's ending of the program. He also told Mr. Wells that he questioned whether Mr. Greenberg's statement about the program lasting 200 years made it legally binding.

"I'm extremely doubtful about it," he said, adding, "I don't think it legally holds him to it."

Judge Rakoff also seemed to be showing some impatience with the pace of the trial, telling attorneys for both sides that from his review of the witness list, "So far, I am mystified why any of these experts have any relevance to this case at all," repeating "At all!" loudly.

SICO's attorney, David Boies, wrapped up his cross-examination of Mr. Greenberg by having his client reiterate his stance that the more than 30-year-old compensation program was created by SICO to benefit a select group of employees and AIG itself. Mr. Greenberg testified that SICO paid the awards every two years at the discretion of its voting shareholders.

According to Mr. Greenberg's testimony, SICO received its shares as part of the incorporation of C.V. Starr Insurance Co. and SICO, which remained private entities, and the integration of publicly held insurers that formed AIG in 1970.

Mr. Wells, in his re-direct examination yesterday, questioned where Mr. Greenberg got his information that AIG had sought to end its relationship with SICO after Mr. Greenberg was forced out of AIG in the midst of an accounting scandal. Mr. Greenberg said a hostile relationship that developed between the two companies was one of the major reasons for the compensation program's end.

A question was also raised by Mr. Wells about whether an attorney for AIG's outside board of directors ever told Mr. Greenberg that it was not a good idea to have an outside company pay compensation to AIG employees.

Mr. Greenberg has stressed that while SICO is a financial vehicle, its ultimate goal is to fund a charitable trust, The Starr Foundation. Mr. Wells attempted to shake that contention, saying there was nothing in available documents to show that there was any mechanism in place to enforce that goal.

Attorneys for both sides indicated that they should wrap their questioning of Mr. Greenberg today.

Special Reports /

AIG Has Trouble Proving Case Against SICO, Judge Says

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