AIG, Starr had agreement on pay plan - Greenberg

By Grant McCool

NEW YORK (Reuters) - Maurice "Hank" Greenberg, former head of American International Group (AIG.N), testified on Monday he believed in 2005 that AIG wanted to end a deferred compensation agreement with Starr International, the company he now controls.

On his fifth day in the witness stand in Manhattan federal court, the 84-year-old Greenberg said under questioning from AIG lawyer Ted Wells that there was "a total breakdown of communications" between AIG and sister company Starr after he left the firm in March 2005.

Greenberg, who built AIG into the world's largest insurer, is testifying at a jury trial over the issue of who is the rightful owner of stock held by Starr. Starr funded an executive compensation plan for AIG's top managers for 35 years, but the plan ended the year Greenberg was ousted as chief executive of AIG.

The insurer sued Starr to reclaim $4.3 billion (2.63 billion pounds) in proceeds from stock sales and to wrest back 185 million other shares with the intention of bringing funding for the retirement plan in-house.

"I believe there was an agreement," Greenberg told the jury before U.S. District Court Judge Jed Rakoff. "Discussions that the DCPPP (Deferred Compensation Profit Participation Plan) couldn't continue were ongoing conversations.

"After I left, the rhetoric on that increased," said Greenberg, looking calm and dressed in a blue suit, white shirt and bright blue tie.

He said he had no conversations with Martin Sullivan, who replaced him as chief executive, or Frank Zarb, who replaced Greenberg as chairman.

Greenberg left AIG amid allegations of improper accounting at the insurer. He remained chairman of Starr, which held AIG stock worth more than $23 billion at one point.