American International Group Inc. and the U.S. asked a judge to dismiss claims in a lawsuit by former AIG Chief Executive Officer Maurice “Hank” Greenberg challenging the government’s bailout.
AIG “would face incalculable harm” to its brand, image and relationships with shareholders, customers, regulators and elected officials if the company joined a suit against the government brought by Greenberg’s Starr International Co. Inc., AIG said in asking the U.S. Court of Federal Claims in Washington to uphold its decision not to join the litigation.
“AIG’s directors had every right to decide, in the exercise of their business judgment, that suing the government for its rescue of AIG is not the right thing for AIG to do, and that AIG’s interests are better served by focusing on the future and not joining litigation concerning the past,” according to the filing.
The U.S. initially took a stake of 80% in AIG in September 2008, increasing that to 92% as the aid package swelled to $182.3 billion. The New York-based insurer repaid the assistance last year.
AIG’s board on Jan. 9 unanimously agreed not to join Starr’s suit, saying it was unlikely to succeed and risked harming the insurer’s reputation after the bailout.
Concerns about reputational harm “were confirmed for the board by the wave of negative publicity triggered by the board’s mere consideration of Starr’s demand,” AIG’s filing said.
Starr, a closely held investment company, initially sued the government in 2011 for $25 billion, calling the public assumption of the majority of AIG stock a seizure of property in violation of the U.S. Constitution’s Fifth Amendment right to fair compensation.
The motion to dismiss “only repeats the position taken by the AIG board in January when it declined to take over and tried to stop Starr from pursuing derivative claims on behalf of the company,” Robert Dwyer, of Boies, Schiller & Flexner, Starr’s law firm in the case, says. “Starr intends to oppose that motion.”
The motion, filed late Friday, seeks to dismiss only the derivative claims asserted by Starr in AIG’s name.
A separate filing by the U.S. Justice Department asked Judge Thomas Wheeler to dismiss Starr’s entire complaint, including the claim of an illegal taking of property.
Justice Department lawyers cited an earlier ruling by Wheeler that the government’s ownership interest in AIG “provides further support for the view that plaintiffs have standing to bring a direct claim.”
The government “today owns no AIG shares,” the Justice Department said in its filing. “That factor provides further support for the conclusion that Starr lacks standing to pursue direct claims.”
The case is Starr International Co. v. U.S., 1:11-cv-00779, U.S. Court of Federal Claims (Washington).
To contact the reporter on this story: Andrew Zajac in Washington at firstname.lastname@example.org.
To contact the editor responsible for this story: Michael Hytha at email@example.com.
Register or login for access to this item and much more
All Employee Benefit Adviser content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access