AIG Considers Joining Suit Claiming Its Government Bailout Harmed Shareholders
Posted Jan 08, 2013 02:35 pm CST
American International Group will likely appear an ingrate if it agrees to join a lawsuit against the U.S. government claiming the insurer’s $182 billion bailout harmed shareholders.
But AIG could face additional shareholder lawsuits if it decides against joining the $25 billion suit and the action ultimately proves successful, according to the New York Times DealBook Blog.
A company run by one-time AIG chief executive Maurice Greenberg filed the suit in November 2011. The complaint alleged the government charged “punitive” interest rates on its loans and enabled a “backdoor bailout” of the insurer’s Wall Street clients by using AIG money to pay off credit default swaps, according to DealBook and a Reuters story published at the time.
The company, Starr International, once owned 12 percent of AIG. Its representatives will ask the AIG board on Wednesday to join the suit claiming violations of the Fifth Amendment right to just compensation for government takings of property.
Named as defendants are the U.S. Treasury Department and the Federal Reserve Bank of New York. The suit against the Treasury Department is pending in Washington, D.C., while a federal judge in New York has dismissed the suit against the Federal Reserve Bank.
Jack Gutt, a spokesman for the Federal Reserve Bank of New York, told the Times there is no merit to the allegations. “AIG’s board of directors had an alternative choice to borrowing from the Federal Reserve,” he told the Times, “and that choice was bankruptcy.”