Maurice R. "Hank" Greenberg, American International Group's (AIG) former chief executive, said Tuesday that Starr International Co.'s voting shareholders believed they had lost "control" of AIG after Greenberg was forced out in March 2005.

As a result, the voting shareholders, including Greenberg, canceled a deferred compensation plan for select AIG executives. Greenberg said Starr International, or SICO, retained the right to cancel the plan and it wasn't a violation of the fiduciary duty of the voting shareholders to end the plan.

"I think the voting shareholders had confidence in me. The record of AIG speaks for itself," Greenberg said. "I do not think they knew what AIG would hold in the future. They're all individuals and vote their confidence."

Greenberg, who is SICO's chairman, is a key witness in a legal clash between SICO and AIG over millions of AIG shares held by the one-time sister company to AIG. The shares were used to fund the deferred compensation plan. "I was just one of 11 voting shareholders," Greenberg said. SICO was AIG's largest shareholder until the U.S. government stepped in last year to save AIG from collapse.

AIG has sued SICO for $4.3 billion in damages - representing the sale of tens of millions of AIG shares since Greenberg left the insurer - and the return of more than 185 million shares SICO controls. The stock went to SICO in 1970 as part of a reorganization of AIG and its affiliates.

The jury trial is being heard in U.S. District Court in Manhattan and is expected to last a month. Greenberg is expected to continue his testimony on Wednesday.

AIG claims the shares were set aside in a trust to fund a deferred compensation plan for a select group of AIG executives and were improperly diverted by SICO and its management. About 1% of the company's employees and executives participated in the incentive plan.

SICO's lawyers have said the shares were placed aside for a number of purposes, including protecting AIG from a takeover bid, to go to charity if SICO were liquidated and to fund other projects. The decision on whether to fund the compensation program lay with SICO's voting shareholders, which include Greenberg.

Greenberg testified that control of AIG was an important component of the reorganization to the voting shareholders and the compensation plan was a way for them to enhance their investment - namely by retaining key AIG employees and creating incentives for them to build the company.

"If the people do well, the company does well and SICO does well," Greenberg said. But, "SICO had the absolute right to terminate at any time it deemed so," he said.

SICO initially received about $110 million in stock. The shares had grown in value to $2.5 billion in 1991 and were worth as much as $20 billion at one point.

However, AIG's stock has been under pressure in the past year and the company had to seek government assistance to avoid collapse last year.

On Tuesday, Greenberg testified AIG itself didn't want to continue the deferred compensation plan, which granted a portion of the shares to participating employees and executives when they retired, after he left the company.

"AIG said they didn't want an outside company deciding compensation for AIG," he said.

Earlier Tuesday, David Boies, a lawyer for SICO, said in his opening statement that it was only after AIG had filed the lawsuit that it began to make the claim that the trust was designed to benefit AIG.

"They were telling everybody internally and externally these were SICO shares," Boies said. "They could do anything they wanted with them."

Boies said the pledge made by SICO's voting shareholders, including Greenberg, was to preserve the value of the shares for use by SICO and to ultimately go to a charity when the company is resolved.

The voting shareholders "were obligated not to take it for themselves," Boies said.

After Boies completed his opening statement, jurors got their first taste of Greenberg as AIG introduced videos of speeches he gave in 1996 and in 2000 to AIG employees and talked about the deferred compensation program.

In the 1996 speech, Greenberg said the purpose of the program was to "provide an incentive for future generations" of AIG managers and employees.

In the speech, Greenberg said he and the other voting shareholders in 1970 were entitled to take the shares as their own, but instead set aside the stock to fund the compensation program.

"It was the most unselfish act in corporate history that I know of in this country," Greenberg said in the speech.

-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com -