AIG, Greenberg Battle

In Court Over Starr Int'l

By Daniel Hays

American International Group filed suit last week in ManhattanFederal Court seeking to wrest control of billions of dollars worthof AIG shares held by Starr International Company, controlled bythe carrier's former CEO, Maurice Greenberg.

AIG's move was a counterclaim to an action brought by theBermuda-based Starr International, which sued in July to obtain $15million worth of art hanging in various AIG buildings.Starr--which, according to court papers, owns about 12 percent ofAIG common stock--said the artwork was its property. The stock, byAIG's estimate, is worth "well over $15 billion."

AIG management and Starr, which lists Mr. Greenberg as chairman,have been in a legal tussle since Mr. Greenberg was forced to leaveas AIG chairman and CEO when company operations came underinvestigation by New York Attorney General Eliot Spitzer. Mr.Spitzer filed suit against AIG, charging the company withfraudulent accounting.

Starr International was operating from an AIG Bermuda officebuilding, but has since moved to Dublin and to another Bermudalocation after the two firms clashed over control of companydocuments. Starr, which has a Bermuda operating permit, isincorporated in Panama.

The AIG suit accuses Starr International of breach of contractand unjust enrichment. AIG said Starr was attempting to convert AIGshares for its benefit, "in violation of a long-standing agreement"to retain and use the shares "for the benefit of AIG and AIGemployees."

Starr share assets have been used to provide deferredcompensation to AIG top management and longtime employees. AIG, inits action, said Starr had indicated it intended to discontinue thedeferred compensation program and use 270 million of its 290million shares for the benefit of its directors, officers andothers. These "others" included fired AIG employees who refused tocooperate with authorities investigating AIG, the court paperssaid.

Starr, in its July filing, said although it owns 12 percent ofAIG common stock, "AIG does not own Starr International stock;Starr International is not an affiliate of AIG; and StarrInternational is not controlled by AIG. AIG has no right to, orinterest in, Starr International or its property." AIG'scountersuit rejects those claims.

The AIG papers noted that two days after Mr. Greenberg resignedas AIG chairman, Starr ousted all AIG officers from its board.AIG's suit seeks an order restoring its officers to the Starrboard.

AIG said Starr International has failed to implement a 2005-2006deferred compensation plan for employees, which is "inconsistentwith the longtime agreements and understandings" between Starr andAIG. The program, AIG said, was "expressly created to increaseAIG's bottom line by promoting loyalty and stability among its mostvalued employees."

AIG said it believed Starr intends to convert its AIG sharesinto an investment vehicle to generate profits for itself, itsofficers, directors and others who will be "unjustly enriched atthe expense of AIG, AIG shareholders and AIG employees."

In addition to his post at Starr International, Mr. Greenbergcontrols another entity--C.V. Starr--which owns nearly 2 percent ofAIG's stock. C.V. Starr, a Delaware corporation, operates as aninsurance brokerage.

Caption for Greenberg mug:

AIG is challenging its former CEO, Maurice Greenberg, overcontrol of billions of dollars worth of the carrier's stock