The legal battle between American International Group and Maurice “Hank” Greenberg, AIG’s former chairman and chief executive officer who now heads C.V Starr & Co., Inc., has heated up with the filing of another lawsuit over business between the two parties dating back to 2000.
Greenberg’s C.V. Starr & Co., Inc. has sued AIG for what it says are “hundreds of millions of dollars in profits and benefits” that current AIG officers have enjoyed as a result of some $5 billion in business C.V. Starr produced for AIG between 2000 and 2005.
The commissions AIG paid to Starr on this business have been questioned in a lawsuit brought by a teachers’ fund alleging that various officers and directors breached their fiduciary duty to AIG. The fund is asking the court to order Starr to repay all of the commission dollars it received from AIG and any reinsurers between 2000 and 2005.
Greenberg’s lawyers have been pressing to include various other AIG executives as defendants in that dispute to share in any liability.
On June 13, Vice Chancellor Leo Strine allowed Starr’s claim that AIG unjustly benefited from the transactions. “We are pleased that this claim was allowed to proceed at this time,” said Lee Wolosky of Boies, Schiller & Flexner LLP, counsel to C.V. Starr.
However, Stine denied Starr’s request to include additional AIG executives, among them current AIG Chief Executive Martin Sullivan and retired Vice Chairman Thomas Tizzio who were previously dismissed from the litigation, to Starr’s claim. Stine said these parties could be added later for contributory liability purposes should the teachers’ fund prevail in proving that Greenberg and the remaining defendants breached their fiduciary duties to AIG. Greenberg’s lawyers wanted the additional executives added now rather than later.
Starr’s cross-claim against AIG was brought in connection with a lawsuit filed by the Teachers’ Retirement System of Louisiana in Delaware Chancery Court. The teachers’ fund alleges that AIG itself could have done the work that it paid its then-managing agent Starr to do but that the Starr directors sought the payments because they would benefit.
Greenberg has denied any wrongdoing, as have two other Starr directors named as defendants by the teachers’ fund, former AIG Vice Chairman Edward Matthews and former AIG Chief Financial Officer Howard Smith. They maintain that the commissions Starr received were actually below the industry average.
In arguing that they should not have to face the teachers’ litigation alone, Greenberg and his associates note that current AIG CEO Sullivan and certain other AIG officers and directors were shareholders of C.V. Starr and had participated in the disputed transactions and benefited from the business.
According to Starr’s filing, a number of AIG officers and directors collectively received more than $380 million in connection with the 2005-2006 sale of their C.V. Starr stock. The Starr lawyers maintain that Sullivan, AIG’s current CEO, received $14 million; Win J. Neuger, AIG’s executive vice president and chief investment officer, more than $11 million; Kristian P. Moor, AIG’s executive vice president-Domestic General Insurance, more than $13 million; Donald P. Kanak, AIG’s former executive vice chairman and chief operating officer, more than $12 million; and Thomas R. Tizzio, AIG’s former senior vice chairman-General Insurance, more than $46 million
According to Starr’s team, following Greenberg’s departure from the insurer, AIG changed its strategy over this litigation, getting Sullivan, Tizzio and others removed as defendants while leaving Greenberg and his former management associates exposed.
In 2003, Starr’s lawyers say, AIG’s board of directors appointed a Special Litigation Committee (SLC), which issued a 150-page report concluding that commissions paid by AIG to C.V. Starr in the disputed transactions were “at or below market rates,” and that the litigation should be terminated.
However, Starr claims that “after Greenberg left AIG, the SLC reversed course and decided the litigation should proceed, as long as Sullivan and other then-current AIG directors and officers were removed as defendants and only Greenberg and his management team remained.”
Greenberg’s lawyers maintain that AIG “reversed course only after AIG officers and directors had extracted hundreds of millions of dollars from C.V. Starr.”
As contentious as the AIG-Starr relationship has become, Wolosky indicated there is more fighting ahead. “At the appropriate time, we intend to take legal action against other persons who personally benefited from the C.V. Starr-AIG relationship,” he added in a statement.
Source: C.V. Starr & Co.
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