AIG, Greenberg claim victories in court battle
NEW YORK (Reuters) ? American International Group Inc. yesterday won court permission to temporarily block a firm run by former chairman Maurice ?Hank? Greenberg from luring insurance clients from the world?s largest insurer.
Greenberg?s firm, C.V. Starr & Co., also claimed victory after New York State Supreme Court Justice Herman Cahn extended a Sunday order preventing New York-based AIG from denying access to client documents and office space. Both sides are also barred from removing documents. Cahn?s rulings apply through Thursday, when another hearing is scheduled in his Manhattan courtroom. They come amid a nasty and complicated divorce between Greenberg and AIG, which he built over nearly four decades.
A key issue in the case concerns what AIG called an unauthorised reinsurance agreement between Starr Technical Risks Agency Inc. and National Indemnity Co., a unit of Warren Buffett?s Berkshire Hathaway Inc. known as NICO.
AIG argued in a Friday court filing that the arrangement siphons premiums from AIG and diverts premiums from its reinsurers. Starr Tech is one of four C.V. Starr brokerage agencies. Reinsurers share insurers? claims. ?(Justice Cahn is) not going to stop us from using NICO; however, he doesn?t want us to move existing direct insurance from AIG to NICO,? said David Boies, a partner at Boies, Schiller & Flexner LLP representing Starr, outside the courtroom. He said Starr had not been planning to do so.
Central to the case is a 1992 contract under which Starr Tech has sold insurance in AIG?s name. At issue is whether this creates an exclusive contractual relationship between AIG and Starr Tech.
AIG argued in court papers that the unit has always operated as a ?de facto? division of AIG.
?They are exclusive to the extent that they cannot write something which is competitive,? Michael Carlinsky, a partner at Quinn Emanuel Urquhart Oliver & Hedges LLP who represents AIG, told the court. On Friday, Starr filed a separate lawsuit accusing AIG of withholding and denying access to documents, and telling Starr clients to stop doing business with Greenberg?s company.
The lawsuit came after AIG executives, including chief executive Martin Sullivan, sold more than $63 million of Starr shares in a recent tender offer, court papers show.
?What is going on is AIG is trying to shut down the Starr agencies as competitors, and that AIG is willing to take positions in court that are inconsistent with written contracts, and internally inconsistent,? Boies said. Greenberg, who was not in the courtroom, was forced to retire from AIG last spring amid federal and state investigations into the company?s accounting practices.
This included a probe into a $500 million transaction with General Re Corp., another unit of Omaha, Nebraska-based Berkshire.