Greenberg Takes Stand To Deny Trust Misappropriation

NU Online News Service, June 16, 3:22 p.m. EDT

Maurice Greenberg took the witness stand in Manhattan federal court today to counter charges the company he now heads looted a trust fund allegedly set up to pay bonuses to American International Group executives.

Mr. Greenberg–who left as AIG's chairman and CEO in 2005 after an accounting scandal involving the company's use of finite reinsurance to bolster its balance sheet–is chairman of Starr International Company (SICO), which AIG claims unlawfully misappropriated $4.3 billion in stock that belongs to the trust.

AIG is seeking return of more than 185 million AIG shares that SICO controls.

Before Mr. Greenberg was called to the witness stand, his attorney David Boies denied to the jury that there was ever any trust in existence.

Holding up copies of AIG financial reports, he said: "Tell me, Mr. AIG, where does this show you this trust? This does not talk about creating a trust for AIG's benefit."

Mr. Greenberg, who was called to the stand by AIG attorney Theodore Wells, was asked whether SICO had not in fact been set up exclusively to deal with bonuses for AIG employees.

Mr. Greenberg said, "It could be for other companies acquired by SICO," and that other firms could be involved in the bonus compensation program.

The trial is being held before U.S. District Court Judge Jed Rakoff, who has ruled that AIG's financial condition–having received tens of billions in federal bailout money and government guarantees to keep the organization afloat after credit default swaps in its Financial Product unit nearly bankrupted the firm–will not be a topic for the jury to hear about.

Judge Rakoff has said he would permit speeches Mr. Greenberg made to participants in the SICO plan into evidence, and part of the morning was taken up with introduction of the text of those speeches.