Trial Begins over AIG Retirement Plan

June 16, 2009 by Suzanne Conlon

The former top executive of American International Group Inc. plundered an AIG retirement program of billions of dollars because he was angry at being forced out of the company, a lawyer for AIG told jurors Monday at the start of a civil trial. Attorney Theodore Wells told the jury in Manhattan that former AIG Chief Executive Officer Maurice "Hank" Greenberg improperly took $4.3 billion in stock from the company in 2005, after he was ousted by the company amid investigations of accounting irregularities.

"Hank Greenberg was mad. He was angry," Wells said in U.S. District Court of the emotional state of the man who, over a 35-year-career, built AIG from a small company into the world's largest insurance provider. Wells said that Greenberg, within weeks of being forced out in mid-2005, gave the go-ahead for tens of millions of shares to be sold from a trust fund. The fund was set up to provide incentive bonuses to a select group of AIG employees that they would receive upon their retirement.

Wells showed the jury several clips of Greenberg speaking on videotape about the responsibilities of the trust fund. He called it Greenberg's "videotaped confession." Wells asked the jury to award AIG $4.276 billion and 185 million AIG shares.

Greenberg, 84, has contended through his lawyers that he had the right to sell the shares because they were owned by Starr International, a privately held company he controlled.  "I disagree with a great many things that Mr. Wells said," Greenberg’s lawyer, David Boies told the jury. He said a study of the documents in the case would prove that the shares did not belong to AIG.

In the 1960s, a group of insurance companies were organized under the AIG banner.  Starr International remained a private company and its shareholders decided in 1970 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 has said.  The insurer wants to reclaim the money from Starr it says was wrongly pocketed through stock sales by Greenberg.

The trial relates to events that occurred long before AIG found itself under attack earlier this year over its bonus program.   The company was roundly criticized after it accepted $182 billion in federal aid and then paid out $165 million in bonuses to employees, including some in the financial unit that caused AIG’s near collapse.