AIG, SICO Lawyers Trade Accusations During Closing Arguments Of Executive Fund Trial

During closing arguments of a multibillion-dollar lawsuit between American International Group Inc. and Starr International Co., jurors were told that Maurice "Hank" Greenberg has been lying and covering up the looting of a trust to fund an AIG executive compensation plan. SICO lawyers refuted the charge, while claiming AIG had invented the idea of the plan in an effort to seize SICO assets.

"He fabricated evidence and he gave false testimony," AIG attorney Ted Wells said of Greenberg.

Wells, at times gesturing broadly and leaning in toward the jurors, said Greenberg and SICO executives created a trail of false and misleading documents, including board of directors minutes indicating that AIG and SICO had mutually agreed to terminate the compensation plan, because "they knew a lawsuit was coming."

"It just didn't happen," Wells said. "False, false, false. And the reason they did it was because they were wrong, wrong, wrong. ? It's almost an audacity of arrogance."

SICO attorney David Boies told the jurors that the AIG claim was "outrageous" and said that the company invented the notion of a trust despite not having a written document creating it.

He said the only trust created was a charitable foundation that ultimately would receive the SICO assets, and that the voting shareholders who created SICO and AIG out of predecessor private companies in 1970 decided to fund the compensation plan only at their discretion.

"That is what they always said, and that is what everyone always understood they meant, until this litigation," Boies said.

The suit is being tried before U.S. District Judge Jed Rakoff in New York. AIG claims that in 2005, after Greenberg was forced out after nearly four decades as chairman of AIG, he engineered a takeover of the SICO board and SICO-owned AIG stock valued at one point at $20 billion.

AIG is seeking control of the stock and $4.3 billion that it claims Starr reaped in selling 96.9 million shares of the stock between 2005 and 2009. SICO maintains that there was no formal trust agreement and that the ultimate goal was to use the trust's assets for charitable purposes.

During several days of testimony, Greenberg described numerous SICO investments and business start-ups he said were paid for in part by the AIG stock sales.

Wells recounted testimony, and documents entered into evidence dating to the early 1970s in which Greenberg said the AIG stock was always intended to fund the compensation plan, including memorandums, media interviews and a letter from AIG audit firm PricewaterhouseCoopers to the Irish Tax Authority, stating that the stock was always meant to fund the AIG executive retirement plan. These included videotaped Greenberg speeches Wells said "are liked videotaped confessions."

Rakoff had earlier determined he would decide the claim that SICO breached its fiduciary duty, and the jury will determine if it improperly converted, or took, AIG shares. 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).

AIG has said that if the case is decided in its favor, it will use proceeds of any judgment to help repay the $182.5 billion bailout package it received from the federal government (BestWire, June 12, 2009).

Most AIG insurance companies currently have a Best's Financial Strength Rating of A (Excellent) with a negative outlook.

(By Alyn Ackermann, senior associate editor, BestWeek: Alyn.Ackermann@ambest.com)