AIG refuses to join lawsuit against US government
The board of giant insurer AIG decided Wednesday not to join a private shareholder lawsuit against the US government over the $182 billion rescue of the insurer in 2008.
The lawsuit filed by Starr International, which is controlled by former AIG chief executive Maurice "Hank" Greenberg, argued that the massive bailout of AIG did not fairly compensate shareholders. Starr sued the government for about $25 billion in November 2011.
"The AIG Board has determined to refuse Starr's demand in its entirety, and will neither pursue these claims itself nor permit Starr to pursue them in AIG's name," the company said in a statement.
The government took control of American International Group Inc in September 2008 to prevent its imminent collapse from sparking a cascade of gigantic failures throughout the global financial system.
But the rescue wiped out most of the value of AIG's shares.
The US has slowly sold off its holdings in the company over the past two years, disposing of its last shares only in December. The Treasury said the government had earned a $22.7 billion net profit on the bailout.
Starr petitioned the AIG board to join in or take the lead in the suit.
AIG laid out its options in a Wednesday statement, saying that it could take over and lead the Starr litigation, allow Starr to prosecute the demands on AIG's behalf, or refuse the demand and prevent the Starr litigation, a move that AIG said Starr was likely to contest.
AIG said that if it opted not to join the case and the Starr litigation proved successful, then AIG would "not receive any of the amounts recovered."
In the end, AIG concluded that a determination not to join the suit met the company's "fiduciary and legal" obligations to AIG and its shareholders.
AIG, which has made a point in recent weeks of publicly thanking US taxpayers for the rescue plan, did so again Wednesday.
"America invested in 62,000 AIG employees, and we kept our promise to rebuild this great company, repay every dollar America invested in us, and deliver a profit to those who put their trust in us," said AIG chairman Robert Miller." We continue to thank America for its support."
AIG said that in the coming weeks it would file with the courts a formal statement giving its "underlying" reasons for not joining the suit.
The Treasury Department, which argued with the Federal Reserve Bank of New York that the Starr case has no merit, praised AIG's decision.
"AIG ran a careful process and the Board's decision not to join Starr International's lawsuit is the right result," said Assistant Secretary of the Treasury for Financial Stability Timothy Massad in a statement.
"It is consistent with AIG's determination to rebuild the company, repay taxpayers, and move forward. We continue to believe that Starr's case is without merit and will continue to defend our actions vigorously," Massad added.
Officials with Starr International did not respond to a phone call.