Greenberg Says SICO Documents Show No AIG Claim To Stock

NU Online News Service, June 22, 10:36 a.m. EDT

NEW YORK–Looking over documents that established Starr International Company, Maurice R. Greenberg testified they contained nothing to show that SICO was created to benefit American International Group.

Mr. Greenberg, who was forced out as AIG chairman and chief executive in 2005, remained as chairman of SICO, and AIG is suing SICO in U.S. District Court in Manhattan seeking return of a large block of AIG shares SICO holds.

His comments came Friday during his fourth day of testimony as his defense attorney, David Boies, methodically introduced evidence to counter AIG claims concerning the stock that was used in a deferred compensation program for AIG employees.

After Mr. Greenberg left AIG, SICO ended the deferred compensation program and split from AIG.

The case, being presided over by Judge Jed D. Rakoff, pits the financially troubled AIG in a fight over stock that was worth $4.3 billion in 2005 when Mr. Greenberg left the company amid an accounting scandal.

In its suit, AIG accuses SICO of breach of trust related to an incentive stock bonuses package paid by SICO to select AIG employees through a trust set up for that purpose. The suit also seeks to force SICO to transfer the AIG shares it holds back to AIG.

Mr. Boies cross-examined Mr. Greenberg over the history of the relationship between SICO and AIG and how the bonus program developed.

The companies have their roots in C.V. Starr Insurance Company, which Mr. Greenberg became the chief executive of in the late 1960s. Eventually, two groups of companies were formed–C.V. Starr and SICO, which were private companies, and a group of publicly held insurance companies that would eventually be brought together as AIG.

As part of the evidence he introduced Mr. Boies presented the 1970 contract establishing AIG and what would become SICO.

Mr. Greenberg, smiling, remarked that it was "a very valuable old document."

Using the reorganization and other documents of acquisition, Mr. Boies laid out a relationship between SICO and AIG where Mr. Greenberg testified that there was nothing in the language of any documents that established SICO (originally called American International Underwriters Overseas) was set up for the benefit of AIG.

SICO, said Mr. Greenberg, was established primarily as a trust in Bermuda that was ultimately intended to benefit a charitable organization, The Starr Foundation. However, it was also a business vehicle designed to make investments and create other companies.

According to Mr. Greenberg, it was at the discretion of the voting shareholders of SICO that a small portion of the profits from the company would be used as a deferred compensation program for outstanding AIG employees. The idea was to provide an incentive to AIG employees to remain with the company until their retirement in order to receive the rewards.

Earlier in the week, AIG's attorney, Theodore Wells, produced copies of speeches, an interview Mr. Greenberg gave and correspondence in which he had touted the merits of the bonus program.

The rewarding of deferred compensation bonuses from the more than 30-year-old program stopped shortly after Mr. Greenberg left AIG.

It was revealed that on one occasion, in 2004, there was discussion of a PricewaterhouseCoopers report that contemplated the merger between SICO and AIG. Mr. Greenberg said he opposed the plan primarily because doing so would cost SICO $78 million annually. No action was taken to merge the two.

The trust, Mr. Greenberg said, would eventually be dissolved and turned over to the Starr Foundation or other charitable organizations. Only the trustee of the charitable trust could change the designee, he said, assuring no future generation of SICO directors could change its intent. The trust, he insisted, was never contemplated to become the property of AIG.

Mr. Boies turned to the issue of AIG's directors that Mr. Wells contended were forced to leave SICO so that Mr. Greenberg and his associates would have total control of the trust after he left AIG.

Mr. Wells established that nine AIG executives–including Martin Sullivan, who succeeded Mr. Greenberg as chief executive of AIG–were removed as directors of SICO on March 28, 2005, the same day Mr. Greenberg left AIG.

Mr. Wells contended the action was taken as retribution while Mr. Greenberg said the actions were taken because a hostile relationship had developed between AIG and SICO.

Friday, Mr. Boies produced letters of resignation dated April 4 and 5, 2005 from Mr. Sullivan and nine other AIG executives who were board members of C.V. Starr Insurance Company. Three AIG executives remained as directors on the SICO board until resigning on April 14 and 15, 2005.

Mr. Greenberg said he had conversations with a few of the executives he called "friends and colleagues" who said they had no choice but to resign.

"They said AIG was going its own way," said Mr. Greenberg. "They were all told to resign."

Mr. Greenberg's testimony was expected to conclude today.