Ex-CEO Greenberg: No Fiduciary Duty to Fund AIG Compensation Plan

By | June 17, 2009

Maurice “Hank” Greenberg, former chief executive of insurer AIG, testified before a federal jury on Tuesday that he did not have a fiduciary duty to fund an AIG compensation plan.

“I did not view myself as a fiduciary,” Greenberg, 84, said in a firm voice as he smiled at the nine jurors assembled in U.S. District Judge Jed Rakoff’s Manhattan courtroom.

A key witness in the dispute between Starr International and American International Group, Greenberg appeared at times evasive and often testy under questioning by the lawyer for his former company.

AIG is suing Starr International for $4.3 billion in damages representing the sale of millions of AIG shares since Greenberg left the insurer and the return of more than 185 million AIG shares that Starr International controls.

AIG accuses Greenberg, chairman of Starr, of illegally taking the stock, worth at one point at least $20 billion, in 2005, the year he was forced out as AIG CEO after a 38-year reign.

AIG contends the shares were pledged to fund a deferred compensation plan for selected employees. Starr disputes that saying the beneficiary of the shares was always a charitable trust.

Judge Rakoff ruled earlier that the circumstances of Greenberg’s ouster from AIG, the U.S. government’s $180 billion in bailouts to AIG and the controversial bonuses paid to AIG executives could not be brought up at the trial, calling those matters irrelevant to the matter at hand.

During the four hours of questioning by AIG’s lawyer Ted Wells, Greenberg was repeatedly confronted with letters and videotapes in which he said he had a fiduciary duty to AIG and would use the stock held by Starr International for the insurer’s deferred compensation plan.

Asked about his unpublished letter to Forbes magazine that read in part the shares “should not be used to enrich the then shareholders of Starr International (SICo) but should instead be held by them as fiduciaries for future generations of AIG,” Greenberg said that it was “probably not the best use of language.”

Looking small in the witness box, he blamed others for the decision to suspend the compensation plan.

“I was one of 11 people” he said, referring to shareholders that controlled Starr International at the time.

“They decided the plan should not be continued,” Greenberg said. “The voting shareholders had confidence in me. The record speaks for itself.”

During his nearly four decades at the helm, Greenberg built AIG into what was once the world’s largest insurer.

Greenberg also suggested that AIG had not wished for Starr to continue the compensation plan after he left, since tensions developed between the two sides.

The matter has come to court because there appears to be no written documentation of a trust to benefit the employees.

Greenberg, who was joined in the courtroom by his wife Corinne and son Lawrence Scott, will again take the stand on Wednesday.

The case is: American International Group v Starr International Company Inc 05-6283 in U.S. District Court for the Southern District of New York (Manhattan).

(Reporting by Lilla Zuill; editing by John Wallace, Leslie Gevirtz)

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