Payments by American International Group to a Bermuda-based private holding company owned by AIG?s top executives have been questioned in a lawsuit filed by a Louisiana pension fund.

And New York state Attorney General Eliot Spitzer has asked for information on dealings between AIG and companies operated by C.V. Starr & Company as well as the insurer?s relationship with Barbados-based Coral Reinsurance.

The New York Times reported on Friday that companies operated by C.V. Starr & Company Inc. are being sued by the Teachers Retirement System of Louisiana, which claims that AIG, through Starr, engages in ?rampant unchecked self-dealing?.

And a brief filed by the pension fund in a Delaware court has also questioned payments made by AIG to Bermuda-based Starr International, which handles long term compensation for the insurer.

The Financial Times said yesterday that Mr. Spitzer has requested information from the Delaware insurance regulator about C.V. Starr and is also probing AIG?s ties to Coral Re as part of a broader inquiry into accounting practices in the insurance industry.

The North Carolina state treasurer also said on Friday he has asked the US Securities and Exchange Commission to look into dealings between AIG and its Starr units for possible conflicts of interest.

AIG?s shares were down $1.55 to $66.80 in late trading on the New York Stock Exchange yesterday.

The New York Times said the Louisiana pension fund contends that Starr & Company exists primarily to increase the compensation of AIG?s top executives and directors, some of whom are also Starr directors. At the time the complaint was filed, seven AIG inside directors formed Starr?s board. The number is now five, according to AIG.

?Starr, a private holding company owned by AIG?s top executives and managers, sells specialised insurance policies with AIG?s name on them. Its partners reap lucrative benefits from their Starr stakes,? the newspaper said.

A brief filed by the fund, which was released in part and drew upon 1,300 pages of AIG documents now under court seal, shows that Starr had an operating profit of $47.8 million in 2002 on revenue of $305 million. Starr, according to a defence motion, had a net profit of $109 million from 1999 to 2002, on $2 billion of insurance generated for AIG.

?Starr?s revenue soared to $368 million in 2003 from $132 million in 1999. The pension fund?s brief indicates that Starr?s revenue included what the fund called an unusual component. From 1999 through 2001, Starr kept $404.8 million in certain reinsurance commissions. The fund contended that these payments were improper and detrimental to AIG shareholders, including itself,? the story said.

?Starr?s revenue also included $181 million in direct commissions paid by AIG over the same period, as well as $125,000 for unspecified ?services? and ?rental fees?.

?While AIG. discloses its payments both for the direct commissions and the services and rental fees in its filings, it does not explain what volume of business is represented by the direct commissions, or what the services and rental fees are for, according to the complaint.?

AIG spokesman Chris Winans told the newspaper that the company did not comment on matters in litigation. In its annual report for 2003, AIG ?referred obliquely to the pension fund?s lawsuit, without mentioning it by name, saying that ?AIG management believes the allegations of the complaint are without merit?,? the story said.

The company is seeking to have the case dismissed, saying that litigating the complaint ?would not serve the interest of AIG shareholders.? But the motion says that AIG directors should ?be better informed with respect to AIG?s relationships with Starr? and that AIG?s payments to Starr should be ?better documented.?

Mr. Winans described Starr as ?a partnership that represents an investment opportunity for top executives at AIG, one that represents a competitive advantage for AIG when recruiting.? Starr partners buy their stakes in Starr stock, which pays dividends.

AIG provides limited information about the competitiveness of the various commissions it pays to Starr. It says in its filings that the direct commissions it pays are ?at terms available to unaffiliated parties,? and that the service fees to Starr ?do not exceed the cost of obtaining such services from unaffiliated sources.?

But according to the brief as released, AIG asked PricewaterhouseCoopers, its auditor, to examine whether the direct commissions were competitive. In 2002, Pricewaterhouse found that AIG paid rates in some cases 4.5 percent higher than other companies.

Starr is named after AIG?s founder, Cornelius Vander Starr, who started AIG in Shanghai in 1919. It was formed from insurance businesses that were kept out of AIG when the company went public in 1969. Starr owns a 1.8 percent stake in AIG.

The newspaper said Starr is a managing general agency ? one that functions much like a broker while another company, in this case AIG, backs the policies that Starr sells and assumes their risk. While not a subsidiary of AIG, Starr works solely with AIG.

According to the pension fund?s brief, AIG argues that Starr is needed because neither AIG nor anyone else can do what it does. Starr, AIG is quoted as saying, has brand reputation, name recognition and niche-market specialisation. Cutting Starr loose would prompt Starr?s agents and third-party brokers to take their business to non-AIG underwriters. AIG, the brief says, contends that recreating Starr?s business in-house would involve big costs.

But the pension fund argued that AIG could do all the work and said there is overlap between Starr and AIG?s executives.

The complaint also questions payments by AIG to Bermuda-based Starr International, which is AIG?s long-term compensation plan.

?Starr International received $10 million in unexplained ?service? and ?rental? fees from AIG over the 1999-2002 period. Starr International is AIG?s largest shareholder, with a 12 percent stake worth about $22 billion.

?As with Starr, Mr. Greenberg and six other AIG directors control Starr International and have large personal stakes. Its benefits, unlike C. V. Starr?s, are largely deferred until retirement.?

Starr International also owns a yacht and real estate that AIG rents, according to a Reuters story.