UPDATE: Ex-AIG CEO Greenberg Takes Stand In AIG-SICO Dispute
17 June 2009 - 4:43AM
Dow Jones News
Maurice R. "Hank" Greenberg, American International Group's
(AIG) former chief executive, took the stand Tuesday afternoon in a
long-running dispute over control of a block of shares held by
Starr International Co.
Greenberg, who was forced out as the insurer's top executive in
2005, is a key witness in a legal clash between Starr
International, or SICO, and AIG over millions of AIG shares held by
the one-time sister company to AIG.
"That is the stock the parties are feuding about?" asked Ted
Wells, a lawyer for AIG, referring to shares that went to SICO in
1970 as part of a reorganization of AIG and its affiliates.
"Apparently," said Greenberg, dressed in a charcoal grey suit
and pink tie.
AIG has sued SICO for $4.3 billion in damages - representing the
sale of tens of millions AIG shares since Greenberg left the
insurer - and the return of more than 185 million shares SICO
controls.
The jury trial is being heard in U.S. District Court in
Manhattan and is expected to last a month. Greenberg, who is SICO's
chairman, could be on the stand for a lengthy period of time. AIG
claims the shares were set aside in a trust to fund a deferred
compensation plan for a select group of AIG executives and were
improperly diverted by SICO and its management. About 1% of the
company's employees and executives participated in the incentive
plan.
SICO's lawyers have said the shares were placed aside for a
number of purposes, including protecting AIG from a takeover bid,
to go to charity if SICO were liquidated and to fund other
projects. The decision on whether to fund the compensation program
lied with SICO's voting shareholders, which include Greenberg.
"If the people do well, the company does well and SICO does
well," Greenberg said during his testimony Tuesday.
The initial questioning of Greenberg focused on a document he
signed in 1992, which discussed the history of the 1970
reorganization and the use of the SICO's block.
SICO initially received about $110 million in stock. The shares
had grown in value to $2.5 billion in 1991 and were worth as much
as $20 billion at one point.
However, AIG's stock has been under pressure in the past year
and the company had to seek government assistance to avoid collapse
last year.
Earlier Tuesday, David Boies, a lawyer for SICO, said in his
opening statement that it was only after AIG had filed the lawsuit
that it began to make the claim that the trust was designed to
benefit AIG.
"They were telling everybody internally and externally these
were SICO shares," Boies said. "They could do anything they wanted
with them."
Boies said the pledge made by SICO's voting shareholders,
including Greenberg, was to preserve the value of the shares for
use by SICO and to ultimately go to a charity when the company is
resolved.
The voting shareholders "were obligated not to take it for
themselves," Boies said.
After Boies completed his opening statement, jurors got their
first taste of Greenberg as AIG introduced videos of speeches he
gave in 1996 and in 2000 to AIG employees and talked about the
deferred compensation program.
In the 1996 speech, Greenberg said the purpose of the program
was to "provide an incentive for future generations" of AIG
managers and employees.
In the speech, Greenberg said he and the other voting
shareholders in 1970 were entitled to take the shares as their own,
but instead set aside the stock to fund the compensation
program.
"It was the most unselfish act in corporate history that I know
of in this country," Greenberg said in the speech.
-By Chad Bray, Dow Jones Newswires; 212-227-2017;
chad.bray@dowjones.com -