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September 02, 2009 at 08:00 PM
A federal judge ruled yesterday that Starr International Company Inc. did not breach its trust to American International Group Inc. employees over continuing a deferred compensation program but criticized AIG’s former chief executive for playing loose with the facts at times.
U.S. District Court Judge Jed S. Rakoff agreed with a jury’s recent finding that SICO did not establish a deferred compensation program for the express purpose of compensating AIG employees and that shares in AIG held by SICO were not for that express purpose.
Rakoff’s decision in Southern District Court in Manhattan came after last month’s 3-week trial, where the jury found that SICO did not hold shares of AIG stock for the express benefit of AIG, nor that SICO breached any trust by converting those shares for the benefit of SICO. AIG was not entitled to $4.3 billion in damages, Rakoff ruled.
The jury was asked to act in an advisory role on the question of breach of trust, leaving the final decision to the court.
In his 59-page decision, Judge Rakoff praised AIG and SICO attorneys as “models of good lawyering” but said the case was not “a close one,” as the jury came to a verdict in less than a day of deliberation.
“Oral commitments are just too slippery to be enforced,” Rakoff said in his opinion. “The law will not recognize such an oral trust unless the evidence of its creation is unequivocal.”
AIG, the judge said, “relied heavily on adverse inferences” from Maurice R. Greenberg, the former chief executive officer of AIG and current chief executive of SICO, where attorneys argued he lied to cover up the existence of the trust.
“It was the court’s distinct impression, based on the jurors’ ‘body language,’ that the jury did not credit certain portions of Greenberg’s testimony; but the jury found in SICO’s favor nonetheless,” said the judge.
Rakoff noted of Greenberg’s close to a week of testimony, “that his testimony and the truth did not always converge.” He said Greenberg’s inaccuracies “were not as material as AIG argued, nor warranted the sweeping adverse inferences AIG hypothesized.”
