AIG to Use Any Award From SICO Lawsuit to Repay Loans
Wednesday, Jun 17,2009, 11:44:27 AM Click:
American International Group will use any award it receives in a multibillion-dollar lawsuit against a company controlled by its former chairman to help repay loans and other aid from the federal government, the company said.
The trial, over claims between AIG and Starr International Co. Inc. surrounding control of a large block of AIG stock, begins June 15 before U.S. District Judge Jed Rakoff in the Southern District Court in Manhattan.
AIG is seeking control of its stock and $4.3 billion that it claims Starr reaped in selling some of the stock between 2005 and 2008.
SICO is controlled by Maurice ?Hank? Greenberg, who led AIG for nearly four decades before being forced out during an accounting scandal in 2005.
AIG claims that after leaving AIG, Greenberg engineered a takeover of SICO, which had been controlled by AIG during Greenberg?s tenure, and violated SICO?s fiduciary responsibility for what AIG claims was a trust primarily designed to fund executive compensation plans. AIG claims Starr converted the stock held in the trust, valued at one time at as much as $20 billion, for its own use.
SICO maintains that no trust agreement was ever put into writing.
?AIG intends to use any monetary damages, including the $4.3 billion from SICO?s illicit stock sales, to repay the company?s debt to the U.S. government,? said AIG spokesman Mark Herr.
AIG has been kept solvent since September by a federal rescue plan that has grown to $182.5 billion in loans and other assistance.
Herr said AIG will use ?any stock recovered from SICO for employee long-term compensation, under the oversight of the government.?
SICO spokesman Patrick Dorton said ?this ?trust? was never put in writing, never disclosed to AIG shareholders or the (U.S. Securities and Exchange Commission), and never included on AIG's balance sheet or financial statements.?
SICO originally sued AIG in 2005, claiming the company kept an art collection belonging to SICO, valued at $15 million. AIG countersued over the stock issue. Court documents state that AIG and SICO have agreed that the artwork belongs to SICO (BestWire, June 5, 2009).
Greenberg is on AIG?s witness list and may testify early in the trial.
AIG has also filed suit over the stock in New York state court.
Last year, U.S. District Judge Barbara Jones dismissed claims in the suit that Starr was in breach of contract or of an AIG compensation plan, and that it unfairly held the stock (BestWire, June 24, 2008).
Most AIG insurance companies currently have a Best?s Financial Strength Rating of A (Excellent) with a negative outlook.
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