Greenberg Says Starr Trust Can Do What It Wants With AIG Shares

The exchange took place in U.S. District Court in Manhattan before Judge Jed D. Rakoff.

Mr. Wells through his questions sought to show there was a breach of trust between SICO, which awarded the incentive bonus packages of stock to select AIG employees through a trust set-up for that purpose.

SICO is refusing to transfer AIG stock it holds.

Using commitment letters to shareholders and speeches given by Mr. Greenberg while he was AIG chairman and chief executive, Mr. Wells pressed him to admit that SICO was set-up exclusively for AIG employees.

"It was an incentive to keep AIG going," said Mr. Wells, pointing to language attributed to Mr. Greenberg referring to how awards would be made to a select group of AIG employees who excelled in their jobs.

Mr. Greenberg refuted Mr. Wells' interpretation, saying while it was the hope of SICO's directors that they would continue to provide bonuses to AIG employees for a long time, the choice of who benefited from the plan was wholly the choice of Starr's directors of the plan.

"You are talking about building a company, not its destruction," said Mr. Greenberg. "If AIG maintained growth then [the trust] would have continued to support AIG. If not, then it could take other action."

It was up to SICO's directors to determine where investments would go, noted Mr. Greenberg, and if they did not see continued growth, they were free to make a change.

Turning to the change in direction SICO made in 2005 upon the departure of Mr. Greenberg, Mr. Wells charged that the change in direction took place because of his departure and not because of AIG's performance.

Mr. Greenberg countered, noting that he was only one of 11 voting directors of the trust who decided to make a change.

"They felt they lost control and lost confidence in AIG," said Mr. Greenberg of the decision to change. "They did not know what was going to happen in the future and they voted their conscience."

Mr. Wells reviewed several speeches Mr. Greenberg gave employees who received bonuses under the plan. He noted that in the speeches Mr. Greenberg clearly states that the SICO bonus payments were set-up to incentivize AIG employees.

While he did say the program was intended to incentivize AIG employees, Mr. Greenberg explained, he did not go into the legal details of the plan during what he described as motivational speeches. He also noted, when reviewing the history of the program for his listeners, that it was a unique program meant to reward employees instead of the few SICO shareholders who held AIG stock.

The program was also created to protect Starr and AIG from a hostile takeover in its early years, noted Mr. Greenberg. It was designed to work as an incentive program or, "if mishandled," would either be converted to a charitable trust or liquidated.

SICO is holding onto what was valued in 2005 at $4.3 billion in AIG shares (approximately 290 million deferred compensation shares according to court documents), which AIG claims belongs to it.

Mr. Greenberg, who was called to the stand by Mr. Wells, continues his testimony today.

AIG is seeking return of the shares and payment of damages along with replacing SICO board members with a majority of members representing AIG.

The jury hearing the case will decide the conversion question, but only act in an advisory role on the breach of trust issue. Judge Rakoff ruled that he will make the final decision on that matter.