American International Group Inc. has asked a court to force a company led by its former chief executive, Maurice R. Greenberg, to relinquish nearly $18 billion in stock set up to benefit AIG executives.
AIG, the nation’s largest insurance company, in court papers filed last week in U.S. District Court in Manhattan, accused the company, Starr International Co. Inc., of breach of contract and unjust enrichment.
The claim was made in response to a lawsuit in which Starr International demanded the return of $15 million in art it had allowed AIG to display in its offices before Greenberg was forced out as the company’s chief executive officer in March. Greenberg resigned as CEO and chairman of the company amid widening federal and state probes of accounting irregularities.
In May, AIG restated financial results for the last five years, lowering its profits by nearly $4 billion and acknowledging accounting improprieties, including “improper or inappropriate transactions,” some apparently intended to deceive regulators.
AIG said Starr has recently indicated it planned to discontinue a deferred compensation program for about 700 AIG employees.
AIG spokesman Joe Norton said AIG brought the case “for the benefit of our shareholders and employees.”
In court papers, AIG described the long history of its relationship with Starr International, which was named after Cornelius Vander Starr, who created a worldwide network of insurance companies in the early 1900s.
According to AIG, Starr and his protege and successor, Greenberg, decided in the late 1960s to organize the various companies under one holding company, AIG.
Starr International remained a private company, though. In 1970, its shareholders decided that the amount that its shares of AIG were worth above book value of about $110 million should be used to compensate AIG employees, AIG said.
Starr International now has about 290 million shares or 12 percent ownership of AIG, worth roughly $18 billion, AIG said.
AIG said Greenberg, who is still chairman of Starr International, and its other directors have demonstrated that they plan to discontinue the beneficial relationship between the companies. It asked the court to force Starr International’s 12-member board of directors to once again be made up primarily of AIG executives, as it was before March.
AIG said Starr International also must continue to use its assets to compensate AIG executives, as it has pledged to do repeatedly over the last three decades.
To support its argument, AIG included comments by Greenberg and other Starr International executives over the years pledging that the company’s primary purpose was to reward a select group of AIG management and highly compensated employees.
Howard Opinsky, a Starr International spokesman, said the AIG court papers were wrong to suggest Starr International had to continue compensating AIG executives forever.
“There’s absolutely no contract whatsoever that says Starr International must or will continue to provide a long-term compensation program. It was done because the interests of the company were aligned for many years,” he said.
He said the common stock of Starr International, based in Bermuda and Ireland, was owned by an Irish charitable trust.
He said the company has not yet said how it plans to use its assets in the future.
Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.