Former American International Group (NYSE:AIG) CEO Maurice Greenberg is leading a campaign to sue the federal government for its methods in handling the firm’s bailout in 2008, even though AIG stated back in January that it would not participate in the case.
Despite AIG backing out, Greenberg — through his Starr International firm — and shareholders of AIG have achieved class action status against the government.
The suit alleges that the government unlawfully took property from shareholders in violation of the Fifth Amendment when it bailed the company out in 2008, for $182 billion. After weighing the case, AIG decided not to participate, and forbid Greenberg from pursuing the case in AIG’s name.
“AIG will neither pursue these claims itself nor permit Starr to pursue them in AIG’s name,” the company said. “AIG will move to dismiss the derivative claims asserted by Starr in AIG’s name, consistent with the AIG board of directors’ previous decision. ”
However, that’s not stopping Starr, who received a supporting leg up on Monday when the case was awarded class-action status. Tuesday, Greenberg refiled an adjusted complaint, to move forward without AIG’s backing. With its decision, the insurer could conceivably miss out on millions of dollars rewarded to the plaintiffs, who are targeting the government for $25 billion. However, if they were involved in a winning case, the company would be potentially exposing itself to numerous lawsuits of its own.
AIG faced massive public backlash at the concept that they may be suing the very entity that saved them, pressure which heavily influenced the decision to sit this one out.
Unfazed, Greenberg is still planning on moving ahead with the case.
“Two months ago, the AIG board of directors carefully reviewed Starr’s allegations and decided that they were not worth pursuing. We continue to believe that the claims have no merit whatsoever, and we will continue to defend the case vigorously,” said a spokeswoman for the Treasury Department.
A more in depth look at the case reveals that the situation for AIG was not as bad as Greenberg is asserting, or as bad as it could have been. The New York Times explored the terms of the bailout arrangement, and concluded that the federal government not only displayed great leniency shortly following the bailout, but also that the government could have made significantly more in repayment than it did — but it chose not to.
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