ÌìÃÀÍøÕ¾´«Ã½´«Ã½

American International Group Inc. and former CEO Maurice “Hank” Greenberg said Monday they have agreed to privately arbitrate a shareholder lawsuit, and possibly another, potentially ending a an extended legal fight between the parties.

Relations between Greenberg and ÌìÃÀÍøÕ¾´«Ã½´«Ã½ have thawed with the appointment of Robert Benmosche as ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s chief executive, both men told Reuters in interviews last week. Greenberg said at that time that he wanted to settle outstanding litigation with ÌìÃÀÍøÕ¾´«Ã½´«Ã½.

The agreement, which also involves former CFO Howard Smith, signals a reversal in the contentious relationship between ÌìÃÀÍøÕ¾´«Ã½´«Ã½ and its former executives. It comes after a U.S. judge ruled against ÌìÃÀÍøÕ¾´«Ã½´«Ã½ in one of the cases earlier Monday.

Under the agreement, all the parties immediately agree to arbitration for ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s derivative litigation against Greenberg and Smith, which combined several shareholder lawsuits against ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s former top management. ÌìÃÀÍøÕ¾´«Ã½´«Ã½ assumed responsibility for the complaints.

In addition, the parties agreed to consider arbitration for lawsuits involving Starr International Co. Inc. — a company run by Greenberg. The agreement is subject to final decisions on any appeals in those lawsuits.

Among the cases is a lawsuit that Greenberg, Starr International and the Starr Foundation brought against ÌìÃÀÍøÕ¾´«Ã½´«Ã½ in March 2009 after it suffered large losses from credit default swaps linked to the collapse of the U.S. housing market.

An ÌìÃÀÍøÕ¾´«Ã½´«Ã½ spokesman declined to comment further on the arbitration agreement. Greenberg and Smith were not immediately available for comment.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½, Greenberg and Smith said in a joint statement that the arbitration would begin no later than Oct. 15, 2009, and end by March 31, 2010.

The parties will each propose five potential candidates to serve as arbitrator by Sept. 15, and one will be selected by Sept. 30.

Earlier Monday, a federal judge in New York ruled against ÌìÃÀÍøÕ¾´«Ã½´«Ã½ in one of the Starr International cases, in which the insurer sought $4.3 billion in damages for what it alleged was a mismanaged stock retirement plan composed of ÌìÃÀÍøÕ¾´«Ã½´«Ã½ shares.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ had argued that Starr International breached a verbal agreement in the early 1970s in which Starr pledged its ÌìÃÀÍøÕ¾´«Ã½´«Ã½ shares to fund a long-term deferred compensation scheme for top ÌìÃÀÍøÕ¾´«Ã½´«Ã½ executives.

The U.S. judge in New York rejected the claim, reaffirming a jury’s July ruling on the matter.

Greenberg and ÌìÃÀÍøÕ¾´«Ã½´«Ã½ have been embroiled in legal disputes since he was forced to resign in 2005 amid an accounting scandal, after nearly four decades of helming the insurer.

The ouster is unrelated to the losses that nearly drove ÌìÃÀÍøÕ¾´«Ã½´«Ã½ into bankruptcy last year, forcing it to seek federal help, resulting in a taxpayer lifeline that has grown to as much as $180 billion.

(Reporting by Joe Rauch and Lilla Zuill; Editing by Richard Chang)

.

Topics Lawsuits USA ÌìÃÀÍøÕ¾´«Ã½´«Ã½