Greenberg: No Legal Restrictions On SICO AIG Stock Use

NU Online News Service, June 19, 10:29 a.m. EDT

NEW YORK--Maurice R. Greenberg, the former American International Group chief executive, refused in his testimony yesterday to acknowledge a trust he was involved with had a legal obligation to AIG employees.

Mr. Greenberg, who was forced to leave AIG in 2005, remained as chairman of Starr International Company, SICO, which was created by AIG and holds stock in a trust that had been used to reward top AIG employees as deferred compensation..

The companies have now split and the stock bonuses from the trust held by SICO were discontinued after Mr. Greenberg left AIG. AIG is suing in U.S. District Court in Manhattan seeking the return of shares of its stock that SICO holds, which were once worth $4.3 billion before the company fell on financial hard times.

Mr. Greenberg said SICO's only obligation was a moral one, not a legal one, to pay participants in their retirement.

On the third day of questioning by AIG's attorney Theodore Wells in Manhattan Federal Court, Mr. Greenberg dismissed any assertion that there was a legal requirement for SICO to provide deferred compensation to AIG employees after the companies severed ties with one another.

"I don't know whether there was a legal obligation or not," said Mr. Greenberg. "We would honor what we feel is a moral obligation to pay."

The response came as Mr. Wells continued to hammer at Mr. Greenberg over what he continued to suggest were the legal connections developed through a long relationship between SICO and AIG.

AIG is accusing SICO of breach of trust in a trial before Judge Jed D. Rakoff.

Mr. Wells exhibited a letter to AIG employees participating in the SICO program issued in April of 2005, almost two weeks after Mr. Greenberg left the company and the bonus program ceased.

The letter told participants that contrary to rumors, those shares already promised to them prior to the severing of the relationship with AIG would be paid to them. Mr. Wells focused on a portion of it which stated SICO considered its obligation to pay the bonuses "a sacrosanct commitment that we will honor above all other obligations."

Despite Mr. Wells's insistence that the letter alluded to a legal obligation, Mr. Greenberg steadily denied his assertion, saying SICO's payment of the claims to participants would be honored because SICO made a promise to them.

Since the separation from AIG, Mr. Greenberg said SICO has expanded so it does not rely on the profitability of AIG stock. The firm has set-up a managing general agency writing on paper provided by Berkshire Hathaway with a business concentration in Asia and China.

The company has also sought other capital investments and invested in real estate, and created other insurance companies all of which was the founding intent of SICO, he said.

"We are satisfied with the progress we have made today," Mr. Greenberg said.

Mr. Wells concluded his questioning of Mr. Greenberg by playing an interview from 1995 with an author, Walter Guzzardi, who was researching a book and discussed SICO and its relationship with AIG.

In the interview, Mr. Greenberg repeated what he had said on a number of occasions, that the program was created to provide incentives for AIG employees, and called it a unique program that no other company had ever done.

The afternoon session saw a more relaxed Mr. Greenberg as his attorney, David Boies, began a cross examination.

Questioning Mr. Greenberg, Mr. Boies had the 84 year-old insurance executive detail his career in the Army during World War II and the Korean War where he won a Bronze Star, his start in the insurance industry after leaving the service, joining C.V. Starr Company in 1960.

After taking over the company in 1969, a few years after the death of founder, C.V. Starr, Mr. Boies went over the involved development of SICO and AIG through various mergers and acquisitions.

His introduction of a series of documents sparked a variety of objections from Mr. Wells, which led to lengthy legal arguments and conferences between attorneys and the judge.

Mr. Boies brought out that there was no written record that SICO was created for the express purpose of benefiting AIG or was intended to be a compensation vehicle for employees.

Despite this, "there was no misunderstanding on the purposes and goal of the objectives of what the intent was [of SICO]," Mr. Greenberg testified.