The board of American International Group (AIG) on Wednesday decided not to join a $25 billion shareholder lawsuit against the U.S. government that claims shareholders’ rights were “trampled” during the 2008 financial crisis, the Wall Street Journal reports.
“Most of AIG’s directors began Wednesday’s board meeting leery of supporting a controversial lawsuit that accuses the U.S. government of taking advantage of the company in its rescue from the financial crisis,” the Journal reports.
“Now the WSJ is reporting the board has made its decision: It won’t join the Starr International lawsuit,” the report adds.
The multi-billion-dollar lawsuit was started in 2011 by AIG’s former CEO Maurice Greenberg, TheBlaze reported yesterday.
“The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency,” Greenberg said in his complaint.
The New York Times adds: “Because of the bailout’s ‘punitive’ interest rate, the suit claims the U.S. violated the Fifth Amendment, which protects private property from ‘public use, without just compensation.’”
Not too surprisingly, news that AIG was seriously considering the lawsuit did not go over well.
“AIG’s consideration of the matter this week unleashed a torrent of criticism that the big insurer appeared ungrateful toward taxpayers for the massive rescue effort, one of the biggest of the 2008-09 crisis,” the Journal explains.
“Endorsing Starr’s action,” people familiar with the details of the meeting said, “could hinder AIG’s efforts to rebuild its reputation.”
Greenberg’s case was originally thrown out by a federal judge in New York, but was later taken up in Washington where AIG board members considered jumping on board.
The lawsuit “paints a portrait of government treachery worthy of an Oliver Stone movie,” said the New York judge, ruling that AIG ”voluntarily accepted the hard terms offered by the one and only rescuer that stood between it and imminent bankruptcy.”
Unsurprisingly, the Federal Reserve (which “rescued” the company during the financial crisis) was a bit incredulous towards the insurance giant.
“There is no merit to these allegations,” a spokesman for the Federal Reserve Bank of New York said. “AIG’s board of directors had an alternative choice to borrowing from the Federal Reserve, and that choice was bankruptcy.”
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