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Rescued by a Bailout, A.I.G. May Sue Its Savior
by
Ben Protess and Michael J. De La Merced
Jan.
7, 2013
Fresh from paying back a $182
billion bailout, the American International Group has been running a nationwide
advertising campaign with the tagline “Thank you America.”
Behind the scenes, the
restored insurance company is weighing whether to tell the government agencies
that rescued it during the financial crisis: thanks, but you cheated our
shareholders.
The board of A.I.G. will meet
on Wednesday to consider joining a $25 billion shareholder lawsuit against the
government, court records show. The lawsuit does not argue that government help
was not needed. It contends that the onerous nature of the rescue — the taking
of what became a 92 percent stake in the company, the deal’s high interest
rates and the funneling of billions to the insurer’s Wall Street clients —
deprived shareholders of tens of billions of dollars and violated the Fifth
Amendment, which prohibits the taking of private property for “public use,
without just compensation.”
Maurice R. Greenberg, A.I.G.’s former
chief executive, who remains a major investor in the company, filed the lawsuit
in 2011 on behalf of fellow shareholders. He has since urged A.I.G. to join the
case, a move that could nudge the government into settlement talks.
The choice is not a simple
one for the insurer. Its board members, most of whom joined after the bailout,
owe a duty to shareholders to consider the lawsuit. If the board does not give
careful consideration to the case, Mr. Greenberg could challenge its decision
to abstain.
Should Mr. Greenberg snare a
major settlement without A.I.G., the company could face additional lawsuits
from other shareholders. Suing the government would not only placate the
87-year-old former chief, but would put A.I.G. in line for a potential payout.
Yet such a move would almost
certainly be widely seen as an audacious display of ingratitude. The action
would also threaten to inflame tensions in Washington, where the company has become a
byword for excessive risk-taking on Wall Street.
Some government officials are
already upset with the company for even seriously entertaining the lawsuit,
people briefed on the matter said. The people, who spoke on the condition of
anonymity, noted that without the bailout, A.I.G. shareholders would have fared
far worse in bankruptcy.
“On the one hand, from a
corporate governance perspective, it appears they’re being extra cautious and
careful,” said Frank Partnoy, a former banker who is now a professor of law and
finance at the University of San Diego School of Law. “On the other hand, it’s
a slap in the face to the taxpayer and the government.”
For its part, A.I.G. has
seized on the significance and complexity of the case, which is filed in both New York and Washington.
A federal judge in New York dismissed the
case, while the Washington
court allowed it to proceed.
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