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NEW YORKAmerican International Group Inc. last week filed a lawsuit seeking to gain control over billions of dollars worth of AIG shares currently held by Starr International Co., a private firm formerly affiliated with AIG that is led by Maurice R. Greenberg, the insurer's former chief executive officer.
AIG filed the suit in a New York federal court, in the form of a counterclaim to a July complaint brought by SICO against AIG. That complaint sought to acquire property allegedly belonging to SICO-including a $15 million art collection-from AIG.
SICO currently controls approximately 12% of outstanding AIG common stock, according to court documents. AIG in its lawsuit estimates those holdings to be worth "well over $15 billion."
Mr. Greenberg-who, amid a mounting probe of the insurer, resigned as chief executive officer of AIG in March and from the insurer's board in June-continues to serve as chairman of SICO's board.
In its suit, New York-based AIG contends that SICO should forfeit control of its AIG holdings under "agreements and understandings" whereby it "promised to use its AIG stock to fund a deferred compensation program for AIG employees."
The program it refers to is a decades-old-and recently eliminated-compensation plan operated by SICO, through which senior AIG employees were entitled to post-retirement payments in the form of AIG common stock and cash, provided on top of base salaries and bonuses paid by AIG (BI, July 4).
SICO, the suit charges, "recently indicated its intent to discontinue SICO's Deferred Compensation Program for AIG employees, and to use approximately 270 million of the approximately 290 million AIG shares subject to the Deferred Compensation Program for the benefit of SICO and certain current SICO directors, officers and other individuals associated with SICO."
SICO as of March had awarded a total of about 33.1 million shares of AIG stock to AIG executives via the deferred compensation program since the plan's inception, and more than 22 million have yet to be distributed to the roughly 700 employees that participate in the plan, AIG alleges in its complaint.
A SICO spokesman, who also represents Mr. Greenberg's legal team, said that AIG's lawsuit is without merit and denied the charges set forth in the complaint.
"It was a lawsuit that was merely filed to satisfy potential future litigation," the spokesman said.
"SICO, after providing this tremendously valuable asset to AIG for so many years, is now being criticized for having done so. There was never a contract, agreement or understanding that SICO had to participate in this (program) forever," the spokesman said. "Furthermore, AIG is the one that said this program should be ended," he said.
AIG's board earlier this month approved a new deferred compensation and profit-participation plan to replace the prior SICO-operated plan, according to an 8-K report filed with the Securities and Exchange Commission last week.
AIG's claim for a declaratory judgment seeks to require SICO to create a trust fund for the nearly 290 million deferred compensation AIG shares currently controlled by SICO, operated solely for the benefit of current AIG employees. The insurer also contends that a majority of the SICO board must consist of current AIG employees. Charging SICO with breach of contract and violation of fiduciary duty, among other things, AIG seeks punitive damages and legal fees.
A spokesman for the insurer said "AIG is bringing this case for the benefit of our shareholders and employees," but he declined to comment further.