NU Online News Service, Sept. 1, 11:45 a.m. EDT

After years of lawsuits, American International Group Inc., its former Chairman and Chief Executive Officer Maurice R. Greenberg and its former Chief Financial Officer Howard I. Smith announced late yesterday they have jointly agreed on terms for binding arbitration of various legal disputes between AIG, on one hand, and Mr. Greenberg and Mr. Smith, on the other.

The parties have concluded that it is "preferable to resolve as many of their disputes as possible in a private setting, and in a more expeditious and cost-effective manner," according to a statement.

The action comes on the heels of the appointment of Robert H. Benmosche just weeks ago, who came out of retirement to take over for Ed Liddy as AIG Group's fourth chief executive officer in just over a year.

The arbitration will begin no later than Oct. 15, and will conclude by March 31, 2010, the statement said.

In a written agreement filed yesterday, the parties agreed that the following claims should be submitted immediately to binding arbitration:

o All claims of American International Group Inc. against Maurice R. Greenberg and Howard I. Smith in American International Group Inc. Consolidated Derivative Litigation, Civil Action No. 769-VCS; all claims of AIG against Greenberg and Smith In re American International Group Inc. Derivative Litigation, Master File No. 04 Civ. 8406 (DLC); and all claims of Greenberg and Smith against AIG for advancement or indemnification.

The parties do not purport to include in the arbitration any claims currently being prosecuted in pending cases by AIG shareholders against Mr. Greenberg and/or Mr. Smith.

The parties will consider whether to arbitrate:

o AIG's claims against Starr International Company Inc. ("SICO") in Starr International Company Inc. v. American International Group Inc., No. 05 Civ. 6283; and against Mr. Greenberg, Mr. Smith and the other defendants in American International Group Inc. v. Greenberg et al., N.Y. Sup. Ct., Index No. 600885/08, after final decision on any appeals in the federal SICO case.

o Mr. Greenberg's and related entities' subprime-related claims against AIG (Greenberg v. American International Group Inc., 09 Civ. 1885); Starr Foundation v. American International Group Inc., N.Y. Sup. Ct., Index No. 601380/08; and Starr International Company Inc. v. American International Group Inc. after final decisions have been rendered on defendants' motions to dismiss those actions and any other claims by or between the parties, their agents, and affiliates if and when they arise, the document said.

In the meantime, the parties agree to immediately stay all other proceedings in the state SICO case and the subprime cases with regard to all defendants in those cases. The parties also agree, where necessary, to submit stipulations to make the stays effective as soon as practicable, the document said.

The arbitration will be determined by a single arbitrator, to be agreed to by the parties. By Sept. 15, each party is to propose an initial list of five individual's names, addresses and professional affiliations, the agreement said.

Proposed individuals must be impartial and unbiased, with no significant current or former financial, business or personal relationship with any party, and must have substantial experience with arbitration and with shareholder class and derivative actions concerning accounting issues, according to the agreement.

The parties are to negotiate in good faith until Sept. 30, and select an individual from one of the parties' lists. If no arbitrator is selected from the initial lists, the parties agree that an arbitrator will be appointed.

All of the arbitrator's decisions on all matters will be final, binding and "not appealable by any party in any manner whatsoever, unless and to the extent the arbitrator rules on an issue not submitted to arbitration..." the agreement said.

The parties agree that any order by the arbitrator may be enforced in any court having jurisdiction over the matter.

Finally, the agreement said that the only documents or other information concerning the arbitration to be made public is the arbitrator's final ruling and award.

Special Reports /

AIG, Greenberg, Smith Agree To Arbitration

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