Ex-CEO Maurice ‘Hank’ Greenberg begins testimony

Maurice “Hank” Greenberg, former chief executive of American International Group Inc., said Tuesday that a retirement bonus fund that AIG was trying to reclaim in court was not intended solely for AIG employees.

The New York-based insurance giant has accused Greenberg, through a company called Starr International that he controls, of plundering an AIG retirement program composed of $4.3 billion in stock in 2005. The questions being raised in federal court in Manhattan are who ultimately controlled the fund and what its main purpose was.

When AIG’s lawyer, Theodore Wells, asked about the intended purpose of the fund, Greenberg said: “It was not just for AIG employees.”

The fund operated by Starr had many other purposes, Greenberg said. One purpose was to allow Starr to control AIG, he said, and after Greenberg was ousted from his job at AIG, Starr’s voting shareholders “lost control.”

“They had confidence in me,” Greenberg said. Because that control over AIG was lost, Starr acted within its rights in taking over the shares, he asserted.

The fund was “a plan. A plan is not cast in concrete. There had to be certain performance standards,” Greenberg said. If those standards were not met, Starr’s voting shareholders “had a right to make a change,” he said.

Greenberg, 84, built AIG over his 35-year career from a small company into the world’s largest insurer. He was ousted as chief executive of AIG in 2005 amid investigations of accounting irregularities, but Starr International remained AIG’s largest shareholder until the federal government bailed out AIG last year.

The lawsuit against Greenberg and Starr is a complex one involving a fund that was created during a reorganization of AIG in 1970 with $110 million worth of stock. It grew to $4.3 billion over nearly four decades.

The fund has been described in several letters and speeches by Greenberg over the years as a retirement bonus fund for current and future employees. Lawyers for Greenberg’s firm, however, say it was not clearly described as such by AIG to auditors, shareholders, the Securities and Exchange Commission or insurance regulators.

Even Greenberg acknowledged in a speech several years ago that the fund in question would not be able to be created under current U.S. tax law. Starr International Co., also known as SICO, is a Bermuda-based holding company.