Maurice R. Greenberg, the former chief of American International Group, arriving at federal court in New York on Tuesday.
Maurice R. Greenberg, the former chief executive of the American International Group, testified on Tuesday that he always had the right to disband the insurance company’s retirement plan for top performers and to remove its assets under certain conditions.
Mr. Greenberg, who helped create the plan four decades ago, said the retirement plan was designed, in effect, to self-destruct if A.I.G. were ever taken over or if the company ceased to perform well. He reiterated that he did not loot the plan, as the company now contends in its lawsuit.
“There was nothing that said there was an obligation to continue it indefinitely,” Mr. Greenberg said, appearing as an adverse witness in the first full day of testimony.
A.I.G. has said Mr. Greenberg improperly removed company stock worth $4.3 billion from the plan in 2005, in his capacity as chairman of a private company called Starr International.
The proceeds were invested in new insurance enterprises, some of which now compete with A.I.G., according to Theodore Wells, the lead lawyer for the company. In his opening statement on Monday, Mr. Wells told the jury that by removing the stock from the trust, Mr. Greenberg stuck the company with the bills for its retirement plan.
Mr. Wells told the jury that Mr. Greenberg acted because he was angry about having been “kicked out of A.I.G.” in 2005. Within weeks, Mr. Wells said, Mr. Greenberg sent a corporate jet from Bermuda, where Starr International has its main offices, to New York, to retrieve the stock.
“Totally irresponsible,” Mr. Wells told the jury.
Time and again during Tuesday’s testimony, Mr. Greenberg was presented with his own words about the trust, and challenged on why they seemed to conflict with the facts.
But again and again, Mr. Greenberg rebutted the accusations, saying his accusers were taking snippets of his speeches or quoting old documents out of context.
Jurors watched videotapes, for example, of Mr. Greenberg’s speeches to top managers, in which he told them the plan had been funded so generously it might never run out of shares. That seemed to suggest that the retirement plan would be in place indefinitely, Mr. Wells said. But Mr. Greenberg said that he often gave speeches extemporaneously, and no one would expect them to lay out every aspect of the retirement plan, like legal documents.
“This was a motivating speech,” he said. “This was an overview. It was not intended to give you every detail.”
Mr. Greenberg was also asked about a letter he wrote to a reporter at Fortune magazine in 1998, after she wrote an article describing A.I.G. as being owned by “a shadowy offshore company.” Mr. Greenberg said he felt compelled to clarify the purposes of Starr International, or SICO.
“You wrote that the voting shareholders of SICO were ‘fiduciaries for future generations of A.I.G. managers,’ ” said Mr. Wells. “Now, that letter was not a motivational speech, was it?”
Mr. Greenberg agreed that it was not a motivational speech but said it was not an important letter, either. He said it was written by a public relations official, and he had merely “scrawled” his signature on it.
“The statement by itself is not complete,” he said. “The topic is too complex to limit it to one phrase.”
Mr. Greenberg and his lawyers contend that no “compensation trust” as described by A.I.G. ever existed.
By Mr. Greenberg’s description, the big block of A.I.G. shares financing the retirement plan would instantly revert to a charity affiliated with Starr International if someone tried to take control of the company. The trust had several purposes, fending off corporate raiders among them, he said.
Participants in the retirement plan would still, upon retirement, be able to receive the shares allocated to them until the raid, but at that point they would get no more.
The jury also heard on Tuesday from an A.I.G. executive, Terri Austin, who said she had been a participant in the retirement plan for 10 years, until it was discontinued in 2005. She said that when she received letters signed by Mr. Greenberg welcoming her into the elite plan, some were written on A.I.G. letterhead, and others on Starr International letterhead.
The distinction matters because Mr. Greenberg and his lawyers say the retirement plan belonged to Starr International, not to A.I.G.
Ms. Austin recalled going to meetings of plan participants where Mr. Greenberg said the plan assets “would be held in trust for you,” and called it “unlikely that we would run out of shares to fund the above plan for decades, if ever,” implying that there was a permanent compensation trust.
The jurors are only expected to decide one of the issues in the case: whether Starr International committed “conversion” under Mr. Greenberg’s direction, or improperly used assets for other purposes than they were intended. One juror has been dismissed because he did not speak English well enough to understand the complex issues involved.
The other issue in the case, whether there was a breach of a trust, will be decided by Judge Jed S. Rakoff.
The judge has ruled out any discussion of last year’s bailout of A.I.G., saying it could prejudice the jury. Most of the events being described in the case occurred either in 2005 or in the late 1960s, when Starr International and A.I.G. were re-established in much of their present form.
The case was being held in the Federal District Court for the Southern District of New York.
“There was nothing that said there was an obligation to continue it indefinitely,” Mr. Greenberg said, appearing as an adverse witness in the first full day of testimony.
A.I.G. has said Mr. Greenberg improperly removed company stock worth $4.3 billion from the plan in 2005, in his capacity as chairman of a private company called Starr International.
The proceeds were invested in new insurance enterprises, some of which now compete with A.I.G., according to Theodore Wells, the lead lawyer for the company. In his opening statement on Monday, Mr. Wells told the jury that by removing the stock from the trust, Mr. Greenberg stuck the company with the bills for its retirement plan.
Mr. Wells told the jury that Mr. Greenberg acted because he was angry about having been “kicked out of A.I.G.” in 2005. Within weeks, Mr. Wells said, Mr. Greenberg sent a corporate jet from Bermuda, where Starr International has its main offices, to New York, to retrieve the stock.
“Totally irresponsible,” Mr. Wells told the jury.
Time and again during Tuesday’s testimony, Mr. Greenberg was presented with his own words about the trust, and challenged on why they seemed to conflict with the facts.
But again and again, Mr. Greenberg rebutted the accusations, saying his accusers were taking snippets of his speeches or quoting old documents out of context.
Jurors watched videotapes, for example, of Mr. Greenberg’s speeches to top managers, in which he told them the plan had been funded so generously it might never run out of shares. That seemed to suggest that the retirement plan would be in place indefinitely, Mr. Wells said. But Mr. Greenberg said that he often gave speeches extemporaneously, and no one would expect them to lay out every aspect of the retirement plan, like legal documents.
“This was a motivating speech,” he said. “This was an overview. It was not intended to give you every detail.”
Mr. Greenberg was also asked about a letter he wrote to a reporter at Fortune magazine in 1998, after she wrote an article describing A.I.G. as being owned by “a shadowy offshore company.” Mr. Greenberg said he felt compelled to clarify the purposes of Starr International, or SICO.
“You wrote that the voting shareholders of SICO were ‘fiduciaries for future generations of A.I.G. managers,’ ” said Mr. Wells. “Now, that letter was not a motivational speech, was it?”
Mr. Greenberg agreed that it was not a motivational speech but said it was not an important letter, either. He said it was written by a public relations official, and he had merely “scrawled” his signature on it.
“The statement by itself is not complete,” he said. “The topic is too complex to limit it to one phrase.”
Mr. Greenberg and his lawyers contend that no “compensation trust” as described by A.I.G. ever existed.
By Mr. Greenberg’s description, the big block of A.I.G. shares financing the retirement plan would instantly revert to a charity affiliated with Starr International if someone tried to take control of the company. The trust had several purposes, fending off corporate raiders among them, he said.
Participants in the retirement plan would still, upon retirement, be able to receive the shares allocated to them until the raid, but at that point they would get no more.
The jury also heard on Tuesday from an A.I.G. executive, Terri Austin, who said she had been a participant in the retirement plan for 10 years, until it was discontinued in 2005. She said that when she received letters signed by Mr. Greenberg welcoming her into the elite plan, some were written on A.I.G. letterhead, and others on Starr International letterhead.
The distinction matters because Mr. Greenberg and his lawyers say the retirement plan belonged to Starr International, not to A.I.G.
Ms. Austin recalled going to meetings of plan participants where Mr. Greenberg said the plan assets “would be held in trust for you,” and called it “unlikely that we would run out of shares to fund the above plan for decades, if ever,” implying that there was a permanent compensation trust.
The jurors are only expected to decide one of the issues in the case: whether Starr International committed “conversion” under Mr. Greenberg’s direction, or improperly used assets for other purposes than they were intended. One juror has been dismissed because he did not speak English well enough to understand the complex issues involved.
The other issue in the case, whether there was a breach of a trust, will be decided by Judge Jed S. Rakoff.
The judge has ruled out any discussion of last year’s bailout of A.I.G., saying it could prejudice the jury. Most of the events being described in the case occurred either in 2005 or in the late 1960s, when Starr International and A.I.G. were re-established in much of their present form.
The case was being held in the Federal District Court for the Southern District of New York.
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