Maurice “Hank” Greenberg, former chief executive of American International Group Inc., fabricated documents and lied under oath in a bid to rewrite history and cloud who is the rightful beneficiary of a valuable block of AIG stock, AIG lawyer Ted Wells told a federal jury Monday.
Wells called Greenberg’s assertions at trial that the beneficiary was always a charitable trust no more than an attempt to cover up a pledge made 35 years earlier.
AIG contends Starr International, a private company that was once closely affiliated with the insurer, formed a trust in the 1970s to hold AIG stock to fund a retirement plan for senior managers. The compensation plan was thrown out within days of Greenberg’s ouster from the insurer in 2005.
“What do they do when Greenberg is fired? They go out and rescind … their oath. That is part of the cover-up,” said Wells.
David Boies, a lawyer for both Greenberg and Starr International, told the court that AIG was the one guilty of fabrication. “The truth is that AIG has made up (the trust) for the purposes of this litigation.”
An eight-person federal jury has the task of deciding whether the trust that AIG claims was established was breached, and whether Starr International unlawfully sold shares to fund investments across the world.
Billions of dollars are at stake. If AIG wins, Starr International could have to cough up as much as $4.3 billion in proceeds from stock sales over the past three years, and relinquish 185 million shares of AIG stock. Starr says the proceeds of sales were closer to $2.9 billion.
“They ought to get zero,” said Boies, referring to how much money he thought AIG deserved.
Boies told the jury Monday that AIG’s legal team had failed to come up with anyone willing to testify that there was ever a formal agreement between AIG and Starr International related to the stock. “A huge company contends that there is a huge trust for its benefit and cannot produce a single witness,” he said.
Boies also chastised AIG for taking shots at his client’s character: “No basis for any of the kind of charges that were made against Mr. Greenberg.”
Greenberg, 84, who testified over several days early in the trial and sat through much of the proceedings, was in the courtroom Monday, sometimes scribbling notes, other times holding hands with his wife Corinne, who sat at his side.
Greenberg continued to run Starr International after he was fired from AIG amid an internal investigation into accounting practices at what was once the world’s largest insurer. The block of AIG stock held by Starr was worth more than $23 billion at one point.
Judge Jed Rakoff ruled at the start of the trial three weeks ago that investigations surrounding Greenberg’s ouster, the U.S. government’s bailout and controversial bonuses to AIG executives could not be brought up, saying the matters were irrelevant to the case at hand.
AIG said, subject to approval, it would use any damages to repay taxpayer debt from its bailout.
On Tuesday Rakoff is to give instructions to the jury before it begins deliberations. 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 Gerald E. McCormick and Matthew Lewis)
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