AIG Ouster Riled Him, Greenberg Testifies

NU Online News Service, June 18, 9:36 a.m. EDT

NEW YORK–Maurice R. Greenberg admitted his ire at being forced out in 2005 as American International Group chief executive during persistent questioning by AIG's attorney yesterday.

"Yes, I was angry," admitted Mr. Greenberg, exhibiting a rare sign of annoyance during an otherwise controlled series of responses to unrelenting questions by AIG's attorney Theodore Wells in Manhattan Federal Court.

Mr. Wells, in a methodical series of questions, sought to demonstrate that Mr. Greenberg was motivated by anger at being let go in using his position as chairman at Starr International Company to eliminate a trust holding AIG stock used to provide bonus and retirement benefits to top AIG executives.

Mr. Greenberg was forced out as chief executive and chairman of AIG as the company was in the midst of a growing accounting scandal that led to a restatement of AIG's earnings.

In the wake of activity to improperly inflate AIG's financial picture, five executives–one from AIG and four from General Reinsurance–were convicted of securities fraud and other charges. Mr. Greenberg was named as an unindicted coconspirator in the case.

The exchange between Mr. Greenberg and Mr. Wells took place in a U.S. District Court in Manhattan in a civil trial before Judge Jed D. Rakoff.

At issue is whether there was a breach of trust between Starr International Company, formerly a sister company of AIG, which awarded the incentive bonus packages to select AIG employees through a trust set-up for that purpose, and if Starr can continue to refuse to transfer the AIG shares it holds, worth a total of $4.3 billion at the time.

As he had on Tuesday, Mr. Greenberg rebuffed Mr. Wells' allegations, calmly, and sometimes at great length, laying out how the decision to end the incentive program was made by the 11 voting directors of SICO.

Mr. Wells laid out a time line of events on the severing of the relationship between SICO and AIG in what appeared to be an effort to demonstrate the action was a result of Mr. Greenberg's anger over his dismissal.

Mr. Wells presented a series of documents that showed changes were made in the make-up of the directors of SICO and the language covering the structure and purpose of the program that corresponded with Mr. Greenberg's ouster.

On the day Mr. Greenberg was forced out as AIG's chief executive, a meeting was called of the SICO voting shareholders, which included Mr. Greenberg, where nine SICO directors working for AIG were removed from the board, included in that ouster was Martin Sullivan, who replaced Mr. Greenberg as AIG chairman and CEO. Members of the board were later replaced with retired SICO representatives.

"In 2000, you had made a statement that these were outstanding executives," said Mr. Wells referring to the nine dismissed directors. "Prior to the date [of your dismissal] you did not consider removing them from the SICO board?"

Mr. Greenberg said that was the case, explaining that the consideration was made after the events of that day because of what he termed a "hostile" relationship that had developed between AIG and SICO. He also claimed that he understood AIG sought to sever ties with SICO.

That hostility, he claimed, also led to the physical movement of AIG stock now in dispute from J.P. Morgan Chase in New York to a Bermuda account. That action was taken, insisted Mr. Greenberg, because of fear AIG might try to take the shares from SICO if it remained in the United States.

In speeches and documents in the years prior to Mr. Greenberg's departure from AIG, spanning the 1980′s to 2000, that were entered into evidence, Mr. Greenburg told the select group of AIG, SICO and C.V. Starr Insurance Co. employees that the trust program was intended as a performance incentive for them to remain with the company and remain productive employees.

Mr. Greenberg continuously insisted in his testimony the ultimate goal of the program was charitable, although the talks he gave did not reflect this.

Mr. Wells presented documents indicating that SICO took action after Mr. Greenberg's departure from AIG to amend the understanding of the SICO trust that its ultimate goal was for charitable use and that any prior language should be rescinded.

Mr. Greenberg said the actions were taken after a discussion by the SICO board and drawn up by the attorneys, though he could not recall who specifically made the suggestions. He called the action a "reaffirmation" of the intent of the founding members of SICO, which included himself.

Mr. Wells indicated that he intended to finish his direct examination of Mr. Greenberg today, which would give David Boies, Mr. Greenberg's attorney, the opportunity to cross examine.