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AIG bailout case challenged

Former CEO says board failed to review suit

– American International Group Inc.’s former Chief Executive Officer Maurice “Hank” Greenberg has asked a judge to reject the company’s decision not to join his lawsuit against the U.S. government over its bailout of the insurer, saying the board was coerced by government threats.

Greenberg’s Starr International Co., in an amended complaint filed in the U.S. Court of Federal Claims, also said the board failed to conduct a full and independent review of the lawsuit Starr brought on behalf of AIG shareholders before its Jan. 9 vote. Starr asked U.S. Claims Judge Thomas Wheeler to find the board wrongfully decided to stay out of the case.

“The United States indicated it would wage a negative public relations campaign against AIG and its directors, terminate any cooperative relationship with AIG, and heavily scrutinize AIG’s SEC, tax and other filings from the 2008 to 2010 period when defendant controlled AIG,” Starr’s lawyer, David Boies of Boies, Schiller & Flexner, wrote.

The U.S. government initially took a stake of 80 percent in the company, and the holding climbed to 92 percent as the aid package swelled to $182.3 billion. The New York-based insurer repaid the assistance last year.

AIG’s board unanimously agreed not to join the suit, saying it was unlikely to succeed and risked harming the insurer’s reputation after the bailout.

The case “threatened to destroy much of the good work that AIG and its employees had done rebuilding AIG and its name,” the board said in a Jan. 23 court filing. “This concern was consistent with the media coverage and statements made by elected officials highly critical of AIG for even considering the demand.”

Starr, a closely held investment company, sued the government in 2011 for $25 billion, calling the public assumption of almost 80 percent of AIG stock in September 2008 a seizure of property in violation of the Constitution’s Fifth Amendment right to just compensation.

AIG will move to dismiss the derivative claims asserted by Starr in AIG’s name, the company said last week in an emailed statement.

“The AIG board of directors’ decision has not changed since it refused in January the Starr demand in its entirety, and AIG will neither pursue these claims itself nor permit Starr to pursue them in AIG’s name,” according to the statement.

Charles Miller, a Justice Department spokesman, declined to comment on the filing.

Wheeler last week granted a request by Starr to certify two classes of AIG investors in the suit.

Starr, in the amended complaint filed March 11 in Washington, says AIG’s board was elected to act in the best interests of the Treasury Department. The directors who decided to stay out of Greenberg’s suit were involved in the 2008 takeover, according to the complaint.

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