Greenberg Testimony Appears To Waffle On SICO Control Of AIG

NU Online News Service, June 24, 11:41 a.m. EDT

NEW YORK–Former American International Group Chief Executive Officer Maurice R. Greenberg, yesterday, appeared to contradict some earlier testimony he gave in the AIG stock ownership trial.

Mr. Greenberg was forced out of AIG in 2005 but remained as chairman of Starr International Company, formerly a related AIG entity, which split off and holds a large block of AIG stock. AIG is suing for return of shares worth $4.3 billion in 2005.

In his seventh and final day on the witness stand in Manhattan U.S. District Court, Mr. Greenberg, after earlier indicating that SICO had some control over AIG but split off from AIG when they lost that control, said yesterday that SICO was a passive shareholder and had minimal influence over AIG.

The discrepancy could help AIG in its efforts to impeach Mr. Greenberg's testimony concerning any restriction on SICO's use of the AIG stock it holds.

AIG contends that SICO holds its shares in a trust and some of the profits from that stock were dedicated to funding a deferred compensation incentive program for AIG and other employees.

Mr. Greenberg, in response to questioning from AIG's attorney Theodore Wells, said Starr was a "passive shareholder."

"SICO was not a controlling shareholder," said Mr. Greenberg, adding that AIG management and its independent board of directors did not turn to SICO to "decide what to do."

"We could express our view as a major shareholder," said Mr. Greenberg, and that view could influence AIG's decisions or "not at all," he said, adding that AIG's board was independent and made its own decisions.

Mr. Greenberg, the CEO and chairman of SICO, was called to the stand by AIG to testify about the relationship between the two companies and explain SICO's decision to end a deferred compensation program paid to select AIG employees.

On several occasions during his testimony over the past seven days he said SICO broke-off its relationship with AIG because a hostile environment had developed between the two after Mr. Greenberg left, and SICO did not feel it had control over AIG.

At issue is AIG's contention that SICO breached its trust agreement over the awarding of the deferred compensation incentive bonus packages. AIG argues that the trust was set-up for that purpose. Mr. Greenberg has testified that it was a unilateral decision by SICO's shareholders to take a portion of its profits for the incentive program.

The suit also seeks to force SICO to transfer the AIG shares it holds back to AIG, which were worth a total of $4.3 billion in 2005 when the deferred compensation agreement with AIG was severed by SICO.

Earlier in the trial, SICO attorney David Boies presented a memo of intent from 1970 concerning SICO and the trust that appeared to substantiate Mr. Greenberg's contention that the trust was created separate from AIG and that no individual voting shareholder could take the assets for their personal gain.

Mr. Greenberg noted that SICO was created in part to make the intent of the trust stronger and lay out in writing who the ultimate beneficiary would be.

Another document dated 1981 again repeated the intent of the trust, declaring that 25 years after the last remaining child of the voting shareholders dies, the assets of the trust would be transferred to the Starr Foundation, a charitable organization.

The trial is expected to continue into mid-July.