Former AIG Exec Sues Federal Government For $25 Billion Over Takeover
The United States government takeover of American International Group saved the company from going under during the financial crisis of 2008. As The Wall Street Journal reported at the time, the government drove a hard bargain — tens of billions would get it an almost 80 percent stake of the company — but the government argued if AIG went down, so would the rest of the economy and AIG argued if the company wasn't pumped with money, it would collapse. The U.S. ended up pumping up to $182.3 billion in taxpayer's money to prop up the company.
Today, however, former Chief Executive Maurice R. "Hank" Greenberg filed a $25 billion lawsuit against the federal government arguing that the takeover was unconstitutional, violating the "Fifth Amendment, which says that private property can't be taken for 'public use, without just compensation.'"
"[Starr International Co., a firm headed by Greenberg that was AIG's largest shareholder at the time of the 2008 government rescue] seeks damages for itself and other shareholders of at least $25 billion. AIG is listed as a "nominal defendant" in the suit, which also seeks damages for the company.
"'The Government's actions were ostensibly designed to protect the United States economy and rescue the country's financial system,' the suit says. 'Although this might be a laudable goal, as a matter of basic law, the ends could not and did not justify the unlawful means employed by the Government to achieve that goal.'"
Reuters addsthat what Starr is arguing in his lawsuit is that when the government took control of the company it "failed to compensate existing shareholders."
The U.S. government still owns about 77 percent of AIG. Reuters reports that Starr stepped down before the liquidity crisis his AIG. He resigned in 2005, "after nearly four decades at the helm, amid questions by regulators over its accounting practices."
Update at 3:28 p.m. ET. Treasury's Reaction:
The United States Treasury's Tim Massad, assistant secretary for financial stability, has put out a statement regarding the lawsuit. It reads:
"It is important to remember that the government provided assistance to AIG – and stopped it from collapsing – in order to prevent a meltdown of the entire global financial system. Our actions were necessary, legal, and constitutional. We are reviewing the lawsuit and expect to defend our actions vigorously."
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