AIG, Greenberg Battle

In Court Over Starr Int'l

By Daniel Hays

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

AIG's move was a counterclaim to an action brought by the Bermuda-based Starr International, which sued in July to obtain $15 million worth of art hanging in various AIG buildings. Starr--which, according to court papers, owns about 12 percent of AIG common stock--said the artwork was its property. The stock, by AIG'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 leave as AIG chairman and CEO when company operations came under investigation by New York Attorney General Eliot Spitzer. Mr. Spitzer filed suit against AIG, charging the company with fraudulent accounting.

Starr International was operating from an AIG Bermuda office building, but has since moved to Dublin and to another Bermuda location after the two firms clashed over control of company documents. Starr, which has a Bermuda operating permit, is incorporated in Panama.

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

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

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

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

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

AIG said it believed Starr intends to convert its AIG shares into an investment vehicle to generate profits for itself, its officers, directors and others who will be "unjustly enriched at the expense of AIG, AIG shareholders and AIG employees."

In addition to his post at Starr International, Mr. Greenberg controls another entity--C.V. Starr--which owns nearly 2 percent of AIG's stock. C.V. Starr, a Delaware corporation, operates as an insurance brokerage.

Caption for Greenberg mug:

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

Special Reports /

AIG, Greenberg Do Battle Over Starr International

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