NEW YORK (Bloomberg) — Ex-American International Group Inc. chief executive officer Maurice (Hank) Greenberg was "unhappy" with a stock drop in 2000 driven by concern over the insurer's reserves, the company's head of investor relations testified yesterday in a federal fraud trial.

Ronald Ferguson, the ex-General Reinsurance Corp. CEO, and four other defendants are accused of using a sham reinsurance deal to help AIG inflate reserves by $500 million in 2000 and 2001, deceiving investors about the insurer's ability to absorb losses in order to prop up the company's stock.

Greenberg, who considered the stock price a "report card," called several times on October 26, 2000, as the New York- based insurer fell about six percent, said Charlene Hamrah, head of investor relations.

"We all knew that it was going to be a problem," Hamrah said of the company's earnings announcement that disclosed a reduction in reserves.

Greenberg later approached Ferguson for help creating a no- risk transaction to boost the insurer's cushion for losses, Assistant US Attorney Raymond Patricco said yesterday as the trial began in Hartford, Connecticut. Greenberg, who was forced from his job in 2005, is an unindicted co-conspirator according to government and defence lawyers. He has denied any wrongdoing.

Accused along with Ferguson, 65, are former General Re chief financial officer Elizabeth Monrad, 53; Christopher Garand, 60, a former senior vice-president; Robert Graham, 59, a former assistant general counsel; and Christian Milton, 60, AIG's former head of reinsurance. The defendants are charged with conspiracy, securities and mail fraud, and making false statements.

Defence lawyers say General Re employees believed they had the blessing of supervisors including billionaire Warren Buffett, chairman of Berkshire Hathaway Inc., the insurer's parent. Buffett, 77, hasn't been charged with wrongdoing at Omaha, Nebraska-based Berkshire and has denied any knowledge of improper dealings.