Sponsored by: Investment Center

Something new in your business?  Click here to submit your business press release

Chamber Corner | Main Street News | Job Hunt | Classifieds | Calendar | Illinois Lottery 

Ex-CEO Greenberg defends AIG fund actions

Send a link to a friend

[June 17, 2009]  NEW YORK (AP) -- Former American International Group Inc. CEO Maurice "Hank" Greenberg will return to the witness stand on Wednesday to continue to defend the actions of a retirement bonus fund that AIG is trying to reclaim in federal court.

The insurance giant has accused Greenberg, through a company called Starr International that he controls, of plundering an AIG retirement program composed of $4.3 billion in stock in 2005. The questions being raised at the civil trial in federal court in Manhattan boil down to who controlled the fund, and what its purpose was.

In testimony Tuesday, Greenberg said the fund was "not just for AIG employees." Under examination by AIG lawyer Theodore Wells, Greenberg said the fund had many other purposes. One was to allow Starr to control AIG, Greenberg said, and after Greenberg was ousted from his CEO job at AIG in 2005, Starr's voting shareholders "lost control" of AIG.

Exterminator

"They had confidence in me," Greenberg said. Because control was lost, Starr acted within its rights in taking the shares, he asserted.

He took a swipe at the managers that took over AIG after he left: "Things do change when you have a management that does not adhere to principles that would be good for AIG stock."

The fund was "a plan. A plan is not cast in concrete. There had to be certain performance standards," Greenberg said. If those standards were not met, Starr's voting shareholders "had a right to make a change," he said.

Greenberg, 84 years old, built AIG over his 35-year career from a small company into the world's largest insurer. He was ousted as CEO four years ago amid investigations of accounting irregularities, but Starr remained AIG's largest shareholder until the government bailed out AIG last year.

The lawsuit against Greenberg and Starr is a complex one involving a fund that was created during a reorganization of AIG in 1970 with $110 million worth of stock. Its value grew to $4.3 billion over nearly four decades.

The fund has been described in several letters and speeches by Greenberg over the years as a retirement bonus fund for current and future employees -- a "kind of golden handcuffs." In one speech, Greenberg called the fund's creation "the most unselfish act in corporate history."

Greenberg and his firm's lawyers, however, say AIG never told auditors, shareholders, the Securities and Exchange Commission or insurance regulators that AIG employees were its primary beneficiaries. Instead, they claim, Starr was the beneficial owner of the stock.

It's such an unusual fund that even Greenberg acknowledged in a speech many years ago that it would not be able to be created under current U.S. tax law. Starr International Co., also known as SICO, is a Bermuda-based holding company.

[to top of second column]

Investments

"There is no plan like this in the world," said Greenberg, according to a speech transcript read aloud in court by witness Terri Austin, who is currently the chief diversity officer at AIG.

Greenberg said Tuesday he has been using "the word 'trust' loosely" and not in a "legalistic" way to describe the entity that controlled the stock in question.

Greenberg took control of the fund and then sold tens of millions of AIG shares held in it because he was angry about being ousted, AIG's lawyer Wells said in his opening argument on Monday.

But David Boies, a lawyer representing Starr International, said AIG has repeatedly admitted in the past that Starr was the beneficial owner of the stock.

"They said it internally, they said it externally," he said, showing the jury letters and clips of past testimony from AIG officials.

Furthermore, Boies said, documents show that the trust was not only intended to provide retirement bonuses for AIG employees, but also to finance new projects. The wealth generated, he said, was intended to ultimately go to a charity foundation run by Starr.

It is "wrong" and "outrageous" for AIG to try to grab the shares back from Starr, and Greenberg was not trying to take the stock for himself, Boies said.

"He isn't a bad man," Boies said.

AIG said if it is able to reclaim the $4.3 billion from Starr, the money would help the troubled financial services company repay the government. The government has recently provided AIG with $182 billion in support because of fears that a collapse of AIG would trigger hundreds of billions of dollars in losses at financial institutions worldwide.

[Associated Press; By MADLEN READ]

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Water

Investments

< Recent articles

Back to top


 

News | Sports | Business | Rural Review | Teaching & Learning | Home and Family | Tourism | Obituaries

Community | Perspectives | Law & Courts | Leisure Time | Spiritual Life | Health & Fitness | Teen Scene
Calendar | Letters to the Editor