American International Group (AIG), the world’s biggest insurance company, has sued Maurice “Hank” Greenberg, its former chief executive, alleging that he “misappropriated” $20 billion (£9.9 billion) of its shares.

The lawsuit claims that Mr Greenberg and six other former employees, including Howard Smith, AIG’s former chief financial officer, had breached their fiduciary duty through the “misappropriation of a special block of AIG shares” in 2005.

The shares were held by Starr International, a company affiliated to AIG, which owned a big block of the insurer’s shares to protect it against hostile bids. The shares were also intended to be used to reward staff and the suit claims it was Mr Greenberg’s fiduciary duty to preserve, protect and use the Starr stock for the benefit of AIG.

The suit claims that the defendants, who put themselves on Starr’s board, breached that duty by causing or participating in the removal of AIG managers from Starr’s board. Nine AIG directors were removed from Starr, leaving the six defendants in full control of the board.

Then, just days later, the board ended the use of its AIG shares to compensate the insurer’s staff.

Furthermore, the suit alleges that Mr Greenberg, who now controls Starr, plans to sell or encumber the stock and use it “to start a venture capital and private equity firm to make investments in Eastern Europe”.

Lee Wolosky, one of Mr Greenberg’s lawyers, said: “We believe this is essentially a forum shopping initiative because they are not being successful in their suit in federal court.” That suit, filed in September 2005 against Mr Greenberg, is still pending.

In it, AIG is seeking control of Starr International by securing control of 290 million of AIG shares from Starr. Mr Greenberg sold shares through Starr valued at more than $3 billion last year as the firm invested in ventures such as Chinese private equity and Russian real estate.

An AIG spokesman said: “This new action is really a protective action to preserve our freestanding claims against these individuals personally.” He added that the defendants refused to sign an agreement stopping a three-year statute of limitations on claims, forcing AIG “to file these claims now”.

The other defendants in this latest case are Edward Matthews, Ernest Stempel, L. Michael Murphy, John Roberts and Houghton Freeman.

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