New York, April 4: The Starr International Co, a private holding company that owns 12 per cent of American International Group and a compensation vehicle for AIG executives and employees, is contemplating breaking up with AIG, a person briefed on the company?s plans said.
Regulators, including the Securities and Exchange Commission, the New York Attorney-General?s office and the New York state Insurance Department are investigating AIG for transactions and relationships with firms that might have allowed it to dress up its financial condition.
Separating the two companies could alleviate concerns that Maurice R. Greenberg, who was forced out of AIG because of investigations, might be able to use his control at Starr International as a director to wield power over his former company. If Starr formally separated from AIG, Greenberg would cease to have power over the long-term compensation of AIG officials.
Last week, all current AIG officers and directors were removed from the Starr International board and replaced with people not affiliated with AIG, this person said. Greenberg, who is neither an officer nor a director at AIG, is the president and chairman of C.V. Starr, another privately owned insurance company.
Starr International, which was located in a joint office with AIG in Bermuda, has relocated its offices. The long-term relationship between Starr International, C.V. Starr and AIG remains unclear.
Richard Beattie, who represents the AIG board, said there was no proposal on the table. David Boies, a lawyer representing Starr International, C.V. Starr and Greenberg, declined to comment. C.V. Starr does business with AIG and also distributes compensation to its 80 partners, who are top AIG executives.
AIG?s relationship with both Starr International and C.V. Starr are under scrutiny because of their close ties.
Under consideration, according to the person with knowledge of Starr's plans, over the long term, AIG would take over the role Starr International plays in doling out long-term compensation for AIG directors and officers. Since 2001, Starr International has paid $270 million, before taxes, in long-term compensation to senior AIG executives.
According to these plans, Starr International would set aside funds for any commitments already made; and future payments would be determined by AIG.
Chris Winans, a company spokesman for AIG, declined to comment.
The discussions also contemplated various options for the future of C.V. Starr, which does brokerage work with AIG. The brokerage operations could be sold for fair market value to a third party or folded into AIG in a more formal manner, the person said.
Last week, a showdown erupted over control of documents at the shared AIG-Starr International facilities. A lawyer from Boies' office was supervising the removal of Starr documents when AIG lawyers alerted regulators that boxes were being carted out of the site.
The New York attorney general, Eliot Spitzer, immediately threatened to take action against AIG for obstruction of justice. By the end of the weekend, the company confirmed that one AIG employee had been fired for failing to cooperate in the broader investigation, while lawyers representing both AIG and Starr International worked out a deal with regulators by which the documents would be removed to a separate, secure site.
Because of the close nature of the two companies and their previously shared office space, lawyers have been sparring over who has control over what documents.
