Judge: No Discussions Of AIG Accounting, Bonus Probes

A federal judge said Monday that American International Group (AIG) can't mention investigations into the insurer's accounting that led to the 2005 departure of former Chief Executive Maurice R. "Hank" Greenberg in a dispute over control of Starr International Co.'s ownership stake in the insurer.

U.S. District Judge Jed S. Rakoff in Manhattan also ruled Starr's lawyers can't bring up recent probes into the insurer's controversial payment of retention bonuses to some employees last fall after it took billions of dollars in government bailout money.

"This is a case about an alleged trust and an alleged conversion of valuable share. It's not a forum for airing all the innumerable other issues - many of which are unresolved - about Mr. Greenberg, Starr, AIG bonuses, investigations and what have you," the judge said.

AIG claims Greenberg seized control of Starr International, or SICO, in March 2005 after leaving AIG and reneged on an arrangement where a large block of AIG shares controlled by Starr International was used to fund a deferred compensation plan for select AIG executives.

The block is worth more than $4.3 billion and includes shares sold by Starr in recent years. The shares went to Starr in 1970 as part of a reorganization of AIG and its affiliates.

Jury selection is expected to begin in the federal case later Monday. A similar lawsuit between AIG and Starr is pending in state court in New York.

The trial is expected to last about a month. Greenberg is expected to be called as a witness as soon as Tuesday.

Greenberg left AIG in 2005 in the midst of probes into the insurer's accounting, including a high-profile investigation by then-New York Attorney General Eliot Spitzer.

AIG has faced numerous investigations over $165 million in retention bonuses paid to members of its AIG Financial Products unit after it received federal government help. The Financial Products unit has been blamed by some, including New York Attorney General Andrew Cuomo, for AIG's near-collapse last year.

-By Chad Bray, Dow Jones Newswires; 212-227-2017; [e-mail]