Attorneys for a stockholders' action against American International Group have reached a proposed settlement with the company that would drop claims against most directors, leaving only former AIG boss Maurice Greenberg and two other ex-AIG executives as defendants.
The settlement proposal that was filed last week in Delaware's Court of Chancery in Wilmington would also leave C.V. Starr & Company and Starr International Company Inc.–two outfits with past links to AIG that are still controlled by Mr. Greenberg–as defendants.
The principal claims in the lawsuit concern the validity of commissions as well as service and rental fees paid by AIG to managing general agencies owned by Starr and SICO, both based in Bermuda.
Kenneth Nachbar, an attorney for Teachers' Retirement System of Louisiana, the lead plaintiff in the class action, said in a letter to Chancery Judge Leo E. Strine that the settlement would dismiss claims against current outside directors and drop them against other directors on the condition they sell the Starr stock they hold.
“Claims will not be dismissed against Mr. Greenberg and the former AIG directors [Howard Smith, former chief financial officer, and Edward Matthews, the ex-vice chairman] who left AIG following the departure of Mr. Greenberg and who own Starr stock,” Mr. Nachbar wrote.
The settlement agreement was reached after talks between plaintiff lawyers and a special litigation committee appointed by the AIG board.
According to a spokesperson for Mr. Greenberg's legal team, a report that the committee produced actually shows the arrangements between Starr and AIG were appropriate.
Page 5 of the report submitted to the court on Aug. 14, 2003 states that the litigation committee “has found substantial evidence demonstrating that the commissions paid by AIG to the Starr agencies are fair.”
The lawsuit claimed that AIG should not be paying Starr commissions to originate business could fully generate itself, but the committee found AIG despite its size, “does not have the expertise or resources that it would need within the Starr agencies' niche markets to generate the amount and quality of business that the Starr agencies now generate for AIG.”
This article was updated at 4:05 p.m.
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