Jury Rules for Ex-CEO Greenberg Over AIG in Starr Case

A company run by former AIG CEO Maurice "Hank" Greenberg did not plunder billions from a retirement fund, a jury ruled, dashing the bailed-out insurer's chances of collecting $4.3 billion in damages.

American International Group Inc. took Starr International Co, a private company run by Greenberg, to court in an effort to recover millions of shares held by Starr and get compensation for stock sold.

Tuesday's decision is the latest blow for AIG as it struggles to repay $83 billion in loans from the federal government.

AIG had sought to establish that there was the creation of an oral trust in 1970, entrusting Starr International to use a block of AIG shares acquired in a company restructuring to fund an executive retirement scheme for generations of AIG employees. It charged Starr with breach of that trust, and with a second claim of conversion related to sales of the stock for the company's own use.

The eight-person jury returned their verdict after about five hours of deliberation. It ruled Starr was not liable on the two claims.

However, a final decision on the breach of trust claim will be made by the court by next month.

David Boies, the lawyer for Greenberg and Starr International, said "the quickness of the (jury's) decision reflects the simplicity of the case. The trust AIG is alleging, no one had ever heard of or seen. No document mentioned it and I think the jury recognized that."

Boies added he was "hopeful the judge would see it the same way as the jury does."

A spokeswoman for Greenberg said the decision was a "complete vindication of Starr International and Mr. Greenberg."

Greenberg, 84, was forced out of AIG in 2005 after 38 years as CEO for failure to cooperate with an internal investigation into accounting practices at the insurer that once claimed global dominance.

POWERFUL DECISION

While the final decision in the breach of trust claim will be made by the court, the conversion claim was decided by the jury, meaning that there will be no damages awarded to AIG.

Greenberg, who took the stand for several days early in the three-week trial heard in U.S. District Court in Manhattan, and sat through much of the proceedings, was not present in court for the jury's verdict.

The final decision by Judge Jed Rakoff is expected by next month. Rakoff said in court on Tuesday he would take the jury's determination "very seriously" in coming to his own decision.

AIG and privately held Starr International, often referred to as SICO, were closely aligned until Greenberg left AIG in 2005. He kept control of Starr and its large block of AIG shares, worth in excess of $23 billion at the time. Over time, Greenberg sold some of the stock and started investing in businesses that have at times competed against his former company.

The retirement fund was cut off within days of Greenberg's ouster from AIG in 2005, ending a lucrative plan that had enriched hundreds of senior managers for 35 years.

AIG said in a statement after the jury announced its verdict that it was "disappointed."

"We await the court's final ruling. We continue to believe in the merits of our claims," the statement said.

The ruling was another strike for AIG, already under a dark cloud because of its federal bailout, and an executive bonus controversy that angered lawmakers and citizens nationwide.

AIG's federal rescue stemmed from losses on derivatives sold by a financial products unit. Both the bailout and details around Greenberg's termination were precluded from the trial after the judge ruled the matters were irrelevant to the matter at hand.

The insurer had sought the $4.3 billion based on the proceeds of Starr's AIG stock sales, hoping to use it to help repay its taxpayer debt.

The insurer had also sought to wrest back about 185 million shares held by Starr International, or roughly 9 million, if a 1-for-20 reverse stock split last week is taken into account.

AIG's stock, which has fallen dramatically since the company did a 1-for-20 reverse stock split last week, closed down more than 15 percent at $13.75 on the New York Stock Exchange.

There are still a string of lawsuits outstanding between Greenberg, or companies he controls and AIG, stemming from the parties' bitter 2005 break-up. Greenberg also continues to face civil charges of fraud brought by then New York-Attorney General Eliot Spitzer in 2005 related to complex reinsurance transactions at the insurer.

Tyson Foods Fined $500,000 for Worker's Death

Tyson Foods has sentenced in federal court to pay a $500,000 fine and serve a year on probation for the death of a Texarkana worker overcome by poisonous fumes at a rendering plant in Arkansas.

The Occupational Safety and Health Administration won the maximum fine for a willful violation of worker safety regulations. OSHA said maintenance worker Jason Kelley was overcome by hydrogen sulfide gas generated by decomposing poultry feathers. Five other people were injured.

The federal regulators said Springdale, Arkansas-based Tyson didn't take sufficient steps to reduce exposure to the gas after a March 2002 incident at the River Valley Animal Foods Plant in Texarkana.

Tyson Foods pleaded guilty in January. It said then that the incident was an accident and that steps had been taken to prevent additional ones.

Reducing Workers Compensation Claims during a Layoff

When facing an impending layoff, a risk manager is confronted with a more complex labor environment in which employees' attitudes toward workers compensation require special attention.

The recent downturn in the economy has caused many employers to confront the prospect of downsizing through either a layoff or plant closing. Now, more than ever, employees are becoming anxious about whether their jobs are secure and how they will be able to provide for their families. In times such as these, rumors fly and employees may seek an alternate source of income before their job loss becomes a reality.

Employees that would ordinarily shake off aches and pains may look to exaggerate them and file for workers compensation benefits rather than face the possibility of unemployment. For the risk manager, this can be expensive and challenging.

This article will outline the issues risk managers face and suggest strategies to help guide them through a layoff.

Layoff Problems

Among the problems the risk manager is confronted with are:

• Employees filing claims have little or no incentive to return to work, especially in plant closing situation.
• Reduction in commitment to management objectives of controlling costs by reducing the length of disability and returning to work.
• Claims for injuries become more subjective in nature and often include claims that involve soft tissue injuries or cumulative conditions which are alleged to have developed over a period of years.
• More workers compensation claims are filed since these benefits are usually better and for longer duration than unemployment benefits.
• The percentage of injured employees who retain legal representation typically increases as word of a workforce reduction spreads.
• Many states now require advance notice of plant closings, allowing employees time to pursue potential claims. The federal Worker Adjustment Retraining Notification (WARN) Act requires employers with more than 100 employees to provide 60 days' advance notice in the event of a plant closing or mass layoff as the terms are defined in the WARN Act.

Get Prepared

As soon as the risk manager is informed of a large layoff, a number of steps should be carried out immediately.

• Notify Sabal immediately
• Review with Sabal the relevant workers compensation statutes in the jurisdiction with special attention to cumulative trauma regulations.
• Notify your insurer or third-party administrator (TPA) of plans for the layoff and review existing claims for potential problems.
• Be aware of each state's rate and term of unemployment benefits, and their effect on workers compensation benefits.
• Explore the potential of other benefit programs available to employees. For example, the second injury fund may assist the company to offset claims expenses.

Gather Records

Accurate and complete records of workers compensation claims and employee personnel and medical records are essential to the defense of questionable and frivolous claims. A complete history of timely and accurate records can successfully assist the defense of late or unreported claims that may be triggered by a layoff or plant closing.

• Make sure you know where employee records are kept and, if they are being moved off site, obtain photocopies as backup.
• Identify an individual in management who can provide, explain, and testify regarding these records.
• Create a photographic or video record of plant conditions to preserve a visual image, especially if the physical plant is to be demolished or renovated.
• Consider termination interviews to identify potential future workers compensation claims.
• Evaluate whether termination physicals should be given; explore the potential merits versus risk with your broker or consultant.
• Update all claims information with key personnel so that all available information is in file and with your insurer.

The Best Defense

The potential of claims from a large layoff or shutdown increases the likelihood of exaggerated or fraudulent claims. Since most states have specific time limits for response to claims, the preparation and handling of claims is very important. Consider the following suggestions.

• Insist that the insurer or TPA centralize claims investigation and adjusting to one claims office.
• Request that the insurer or TPA have sufficient staff available to handle the initial caseload so that cases are neither accepted nor denied without adequate investigation simply because of time standard pressures.
• Request one senior claim person is assigned so that information flow and quality of service can be maintained.
• Request that the insurer or TPA hire one defense firm to handle all workers compensation claims. Arrange for defense counsel to visit the plant site prior to a shutdown, if possible, to familiarize themselves with the plant operation.
• Arrange for Sabal to assign a senior claims person to work with the insurer and defense counsel to coordinate and monitor the progress of the cases.
• Have the insurer or TPA identify physician(s) within specialties as experts and familiarize them with the plant conditions prior to a shutdown.
• Make videos of certain job functions available for physicians and as defense exhibits.
• Organize and update detailed job descriptions and locate them for easy access by the insurer and defense counsel.
• Provide defense counsel with names of individuals that are willing and capable to testify regarding the functional requirements of each job.
• Create a list of key personnel by name and title. Obtain home addresses and all telephone numbers (cell and home) in the event they are needed for testimony on litigated claims. Keep in contact and update these lists as necessary.

Additional Suggestions

When employees are certain where their next check is coming from, they will be less likely to file a workers compensation claim. Some ways to help accomplish this include the following.

• Ask local unemployment office to send a representative to facilitate the filing of claims for unemployment and avoid allowing plaintiff attorneys to pick up new clients at the unemployment office.
• Request governmental assistance in placing your trained/professional employees in positions with new employers.
• Explore job placement fairs at your facility and invite area employers.

Conclusion

Risk managers must be prepared to facilitate the effective resolution of workers compensation claims that may arise out of a layoff or shutdown of a facility. By organizing and developing a long-range policy and procedure that is sensitive to the problems and conditions which accompany a large layoff/plant closing, the risk manager can help to control the ultimate cost effect of the layoff/shutdown on their risk management program.

To this end, it is necessary to set solid procedures for investigating, reporting, and recording all potential workers compensation incidents. Without detailed records, no defense may be available to successfully refute late or questionable claims.

Court Approves $843 Million for AIG Investors Hurt By Alleged Fraud

A federal court has approved the distribution of more than $843 million to harmed investors at insurer American International Group, the U.S. Securities and Exchange Commission said Tuesday.

The court estimates that checks will soon be mailed to more than 257,000 AIG investors that were affected by an alleged accounting fraud at the company, the SEC said.

AIG, which has been propped up by billions of dollars in taxpayer funds, was charged with accounting fraud in 2006. The SEC alleged that the insurer falsified its financial statements from at least 2000 until 2005 and reported misleading information about its financial condition.

The company, which did not admit or deny the allegations, had repaid its ill-gotten gains, as well as penalties to the government. In 2007, a federal court authorized the SEC to establish a "fair fund" to distribute the money to harmed AIG investors.

"The commission continues to utilize the tools that Congress provided to ensure that funds are returned to harmed investors to the greatest extent possible," said Dick D'Anna, director of the SEC's office of collections and distributions, in an agency statement.

Florida Governor to State Farm: On Your Way Out, Here's an Award

The man who is letting insurance giant State Farm exit the state, which some fear will foster a property insurance disaster in Florida, gave the insurer an award this week for innovation and disaster mitigation.

State Farm was recognized by Gov. Charlie Crist with the Governor's Hurricane Conference Corporate Award for "innovation and achievement in public awareness and mitigation advocacy."

The award recognizes State Farm's support of StormStruck, an exhibit at Walt Disney World Resort that enables guests to experience the power of a weather event while learning how to prepare for floods, hail, high winds, lightning and more.

The award was presented at the 2009 Governor's Hurricane Conference in Fort Lauderdale this week.

"Long before disaster strikes, State Farm is there educating the public about safety and disaster preparedness," said Jamie France, property/casualty underwriting manager with State Farm Insurance. "StormStruck allows us to reach millions of people and inspire action before a disaster strikes. We are honored that the Conference recognized our commitment to saving lives and protecting property."

State Farm also recognized the the other sponsors of StormStruck: Walt Disney World, Federal Alliance for Safe Homes, RenaissanceRe, WeatherPredict Consulting and Simpson Strong-tie.