International Lease Finance Corp. (ILFC) CEO Henri Courpron is keeping his title, but he has been demoted to second in command and is losing $1 million in annual salary because of a “personal relationship” with an employee under his supervision, says ILFC parent company American International Group (AIG).

AIG says allegations that the relationship resulted in improper use of company assets and inappropriate personnel decisions were “unsubstantiated,” but added that Coupron’s conduct was “contrary to AIG’s expectations of its officers.” An anonymous complaint led to the investigation.

Although Courpron remains CEO, AIG created a new position at ILFC that ranks higher: executive chairman. That role will be filled by Laurette Koellner, an independent director of AIG since June 2009, former president of Boeing International and 19-year employee at McDonnell Douglas. Courpron will report to Koellner, who will report to AIG President and CEO Robert Benmosche.

A source with knowledge of the situation says the company retained Courpron because of the value he provides to the company and the progress it has made under his watch, including a recent Moody’s credit upgrade and $3.3 billion in refinancing this year, and is hoping that the new corporate structure and experience that Koellner brings will help retain that momentum.

In a June 21 letter to employees, Benmosche told them, “I strongly believe that we have taken the right steps to affirm AIG’s and ILFC’s commitment to sound conduct in the workplace.”

“Laurette and I are confident in Henri’s leadership at ILFC, and I know they will work well together to assure that ILFC continues to build on its momentum as the largest independent aircraft lessor in the industry,” he added.

He also reiterated the company’s polices, as stated in the AIG Employee Handbook.

“While voluntary intimate relationships between employees are not prohibited, colleagues who hold positions in the same department or zone of influence (for example, where one employee supervises the other or is otherwise in a position to affect the terms and conditions of the other’s employment), must disclose the existence of the relationship to their managers or Human Resources,” Benmosche said.