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International Group Inc. had questioned for years a retirement bonus plan for top managers because it was funded by a private company at no cost to ÌìÃÀÍøÕ¾´«Ã½´«Ã½ and that may have violated good governance standards, ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s former CEO Maurice “Hank” Greenberg testified on Thursday.

Greenberg said that ÌìÃÀÍøÕ¾´«Ã½´«Ã½ and privately held Starr International had had a public-private partnership for 35 years, but it became strained over time as Greenberg’s relationship with ÌìÃÀÍøÕ¾´«Ã½´«Ã½ became more contentious because of an investigation into ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s accounting practices.

Greenberg, who grew ÌìÃÀÍøÕ¾´«Ã½´«Ã½ into the world’s largest insurer, was ousted from ÌìÃÀÍøÕ¾´«Ã½´«Ã½ in March 2005. He remained chairman of Starr, which held ÌìÃÀÍøÕ¾´«Ã½´«Ã½ stock. Until the U.S. government bailed out ÌìÃÀÍøÕ¾´«Ã½´«Ã½ last September, Starr was ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s largest shareholder.

The ÌìÃÀÍøÕ¾´«Ã½´«Ã½ shares that Starr held were given to ÌìÃÀÍøÕ¾´«Ã½´«Ã½ managers through the retirement bonus plan.

“It was unlikely that the board would want to continue the plan unless they controlled Starr International, which was intolerable in the view of (Starr) voting shareholders,” Greenberg testified before U.S. District Judge Jed Rakoff.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ contends that Starr had pledged to fund the compensation plan in perpetuity. Starr has said it always intended its assets for a charitable trust.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ sued Starr to reclaim proceeds of stock sales and wrest back another 185 million shares, with the intention of bringing funding for the retirement plan in-house .

Greenberg, 84, was questioned by ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s lawyer Ted Wells, who told the court that since 2005 Starr had reaped $4.3 billion from the sale of ÌìÃÀÍøÕ¾´«Ã½´«Ã½ stock.

Looking drawn during his third consecutive day of testimony, Greenberg said he had discussed the fate of the compensation scheme with ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s board. “The last year or two of my role at ÌìÃÀÍøÕ¾´«Ã½´«Ã½ it began to get more heated,” and likely the program would be terminated, he testified.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½, which lost its position as the world’s leading insurer after the U.S. government’s $180 billion bailout, has said that it would use any award from the trial to repay bailout debt.

Judge Rakoff ruled on Monday that investigations surrounding Greenberg’s ouster, the U.S. government’s bailout and controversial bonuses to ÌìÃÀÍøÕ¾´«Ã½´«Ã½ executives could not be raised in the trial because they were irrelevant to the case.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ is arguing that there was an oral contract to fund the deferred compensation scheme in perpetuity based on Greenberg’s speeches, interviews and meeting minutes in which he spoke of holding the shares for the benefit of “future generations.”

Under cross-examination on Thursday by his lawyer David Boies, Greenberg said there had been no mention of a trust or protection of any kind for ÌìÃÀÍøÕ¾´«Ã½´«Ã½.

Greenberg, joined in court by his wife Corinne and two of his sons, Jeff and Lawrence Scott, is expected to take the stand again on Friday.

The case is: American International Group v Starr International Company Inc 05-6283 in U.S. District Court for the Southern District of New York (Manhattan).

(Reporting by Lilla Zuilll; Editing by Toni Reinhold)

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