Judge Says AIG Claim Against Ex-CEO Greenberg’s Firm Can Proceed

By | March 5, 2009

A federal judge has rejected a bid to dismiss one of three remaining claims brought by AIG in a court battle against Starr International Co., a company controlled by former AIG Chief Executive Maurice “Hank” Greenberg, over rightful ownership of a block of AIG shares.

U.S. District Judge Jed Rakoff, in a Tuesday ruling, dismissed a request by Boies, Schiller & Flexner, Starr’s lawyers, for a summary judgment motion related to AIG’s claim of conversion.

Conversion refers to the deprivation of another’s property without authorization or justification.

“We are pleased by the court’s ruling that AIG is entitled to proceed to trial on its claim that SICO (Starr), at the direction of Hank Greenberg, unlawfully converted the AIG shares in dispute,” said AIG spokesman Mark Herr.

Rakoff was recently assigned to the case, replacing Barbara Jones, who had earlier heard the case. The trial was to have begun in Manhattan this week but has been postponed until June.

Both Jones and Rakoff have rejected Starr’s bid to have the conversion claim thrown out.

The court battle is one of numerous lawsuits outstanding between AIG and Greenberg, or companies he controls.

“Starr is confident it will prevail at trial,” said Liz Bowyer, a spokeswoman for Starr International, in an email.

Starr originally sued AIG in 2005 to reclaim items that remained behind when Greenberg left the company, such as a collection of valuable paintings, including one by Vincent Van Gogh.

AIG countersued, claiming the stock held by Starr was intended to fund deferred compensation for AIG employees.

AIG, which was bailed out by the U.S. government last year after it nearly collapsed due to bad mortgage bets, is seeking the return of the AIG stock still held by Starr as well as the proceeds from sales of AIG stock in the intervening years.

Starr held about 290 million shares of AIG when Greenberg left the firm in 2005. It has sold about 80 million shares since, according to Reuters Data.

Starr International has held a sizable stake in AIG since 1970, when Greenberg structured the firm as a vehicle to both protect the insurer from hostile takeover and fund incentive compensation for AIG’s best-performing employees.

(Reporting by Lilla Zuill; editing by Jeffrey Benkoe)

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