AIG: Thanks America, but we may sue you
NEW YORK/WASHINGTON (Reuters) - American International Group, the insurer rescued by the US government in 2008 with a bailout that ultimately totalled $182 billion, drew angry condemnation yesterday after it said it may join a lawsuit against the government alleging the terms of the deal were unfair.
A leading congressional Democrat called criticism of the deals terms utterly ridiculous, and former New York Attorney General Eliot Spitzer - who probed AIG when he was in office - called the prospect of a suit insulting to the public.
The White House declined to comment on the potential for a lawsuit but defended the bailout.
Meanwhile, newly elected Senator Elizabeth Warren, feared by Wall Street as a potential thorn in its side on the Senate Banking Committee, called the suit talk outrageous and said the company should not bite the hand that fed them for helping them out in a crisis.
The move would be something of a shock, given that AIG just launched a high-profile television ad campaign called Thank you, America, in which it offers the public its gratitude for the bailout. On Tuesday, the company promoted the ads on Twitter, even as it came under fire over the lawsuit.
AIG said its board would meet today to discuss joining a lawsuit filed against the government by the insurers former chief executive, Maurice Hank Greenberg.
Greenberg, whose Starr International owned 12 percent of AIG before its near-collapse, has accused the New York Fed of using the rescue to bail out Wall Street banks at the expense of shareholders, and of being a loan shark by charging exorbitant interest of 14.5 percent on the initial loan.
If AIG enters this suit it would be the equivalent of a patient suing their doctor for saving their life, said Mark Williams, a former Federal Reserve bank examiner who teaches in the finance department at Boston University.
A federal judge in Manhattan already dismissed one of Greenbergs suits in November; it is being appealed.
In his ruling dated November 19, Judge Paul Engelmayer said AIG had notified the court it would hold a board meeting January 9 to discuss joining one of the suits, with a decision expected by the end of the month.
A separate suit under different legal theories is still pending in the US Court of Federal Claims in Washington.
In a mid-December hearing in the Washington case, a lawyer for AIG told the court that all sides had already made three written submissions to the board and that the board would spend half the day on January 9 discussing the suit.
One expert in securities law said it appears that the AIG board is acting to protect the company and itself against potential shareholder suits.
I think what youre seeing today is the board making very certain they have satisfied all the requirements of the business judgment rule by conducting an adequate investigation and reaching a deliberate decision, said John Coffee, a professor at Columbia Law School. If they do that, they can be safe.
An AIG spokesman declined to comment beyond confirming that the board would meet as planned. The deliberations were first reported by the New York Times.
The New York Fed said yesterday there was no merit to any allegations that the bank harmed AIG.
AIGs board of directors had an alternative choice to borrowing from the Federal Reserve and that choice was bankruptcy. Bankruptcy would have left all AIG shareholders with worthless stock, a representative of the bank said yesterday.
Elijah Cummings, the ranking Democrat on the House Committee on Oversight and Government Reform, acknowledged that AIGs board has a fiduciary duty to consider the lawsuit. But he also said the company had a choice in 2008 and picked what it considered the better option.
The idea that AIG might sue the government is an unbelievable insult to our nations taxpayers, who cleaned up the mess this firm created, he said in a statement.
Cummings former colleague, the recently-retired Barney Frank, said he was stunned by the news and added that AIG was a fully willing participant in the rescue.
There was not the hint of a suggestion of any coercion. They did this very voluntarily, very gratefully. And if the company were now to go around and join this lawsuit, that would be outrageous, Frank said in an interview.
The US Treasury declined to comment. It completed its final sale of AIG stock in mid-December, concluding the bailout with what Treasury called a positive return of $22.7 billion.
AIG shares fell 0.8 percent to $35.65 in afternoon trade. After losing half its value in 2011, the stock rose more than 52 percent in 2012, tripling the gains of the broader S&P insurance index.
If AIG decides to join Greenbergs suit, it would be another legal victory for the man who once ran the worlds largest insurance company but was ultimately forced to leave under a cloud of scandal.
On Monday, a federal judge ruled that New York Attorney General Eric Schneiderman does not have standing to object to a $115 million settlement between AIG shareholders and the former chief executive. Schneiderman wanted the deal rejected.
The judges ruling apparently clears the way for approval of the deal, whose broad releases would preclude New York from pursuing its high-profile 2005 fraud case against Greenberg, according to court papers.
The state case, brought by Spitzer, accuses Greenberg and former chief financial officer Howard Smith of using sham transactions to mask the companys financial position.
The claims, which Greenberg and Smith have fought through three New York attorneys general, await an appeal at the states highest court.
Former missionaries launch jet carwash
Genuine concern at cost of childcare
Fahy: OBA will fulfil 2,000 jobs promise
Tributes paid to Gombey ‘giant’ Darrell
Man jailed for attempted drug smuggling
I never meant to kill teen — murder accused
Let’s fix hole under road leading to dock
I am what you’re looking for, says Epps
Take Our Poll