American International Group Inc., the world’s largest insurer, has filed a complaint in New York Supreme Court against former Chief Executive Maurice “Hank” Greenberg and six other former directors and officers, accusing them of breaching their fiduciary duty.
The legal action marks another chapter in a complicated three-year battle between the insurer and its former chief after he left the company amid an accounting scandal.
In the complaint, filed on Wednesday, AIG alleges Greenberg, former Chief Financial Officer Howard Smith and five others breached their fiduciary duty through “misappropriation of a special block of AIG shares worth approximately $20 billion in 2005.”
The shares were held by Starr International Co. Inc., a company that had had close ties with AIG, owning a large block of shares for the purpose of protecting the insurer against hostile takeovers, and to fund compensation for current and future AIG employees. Starr, which is now controlled by Greenberg, remains a large AIG shareholder.
The suit is separate from an earlier action under which AIG is effectively seeking to have all shares held by Starr International that were allocated for future compensation of AIG employees placed in a trust controlled by current AIG executives.
A decision in that matter is pending, after Starr International filed a request for summary judgment.
AIG, in the complaint this week, said defendants had a fiduciary duty to preserve, protect and use the stock acquired by Starr International for the benefit of AIG, and had breached that by causing or participating in the removal of AIG managers from Starr’s board, and the cancellation of the future deferred compensation for AIG, among others.
AIG spokesman Chris Winans said the insurer was forced to file the new claims ahead of a three-year statute of limitation, coinciding with the three-year anniversary of the commencement of conduct giving rise to AIG’s claim of breach of fiduciary duty, in order to preserve its ability to take action against the named individuals.
“We expect to be successful in dismissing this additional meritless lawsuit by AIG involving Starr International,” said Glenn Rochkind, a spokemsan for Starr International.
He added that AIG’s new lawsuit amounted to “forum shopping” given it was filed in state court while the other matter is outstanding in federal court.
“AIG shareholders would be better served by its management focusing more attention on the business, improving the company’s lackluster performance, and bringing greater value to the stock,” Rochkind added.
AIG said it had no comment.
Since Greenberg, 83, parted ways with AIG in 2005, amid an accounting scandal, he has retained control of Starr International, running the company as a private investment vehicle. Starr’s 9.7 percent stake in AIG makes it the insurer’s largest shareholder, according to current Reuters data.
The complaint also names Edward Matthews, Ernest Stempel, L. Michael Murphy, John Roberts and Houghton Freeman, all of whom are either former officers of AIG companies or ex-directors, and are voting stockholders of Starr International. Some remain honorary directors of AIG.
AIG said it filed the new complaint after individual defendants refused to sign an agreement that would have effectively waived the three-year statute of limitation.
(Additional reporting by Edith Honan and Emily Chasan; editing by John Wallace and Dave Zimmerman)
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