Maurice “Hank” Greenberg, the longtime former CEO of American International Group Inc. (AIG), on Monday sued — according to the WSJ — the U.S. government and the Federal Reserve Bank of New York for $25 billion, calling the 2008 federal takeover of the international insurer a move that violated the Constitution.
The lawsuit — which accuses the Treasury Department and the Fed of NY of using the insurer as a vehicle to funnel tens of billions of dollars to other institutions and provide ‘back-door bailouts’ on disparate terms far more favorable to those institutions — alleges that by taking a nearly 80% stake in AIG in September 2008 when it agreed to lend the insurer up to $85 billion with a “punitive” 14.5 percent interest without seeking a shareholder vote, “the government took valuable property from Starr International Co. [Greenberg’s company] and other AIG shareholders in violation of the Fifth Amendment, which says private property can’t be taken for “public use, without just compensation.”
Reuters: “The government’s actions were ostensibly designed to protect the United States economy and rescue the country’s financial system,” David Boies, a lawyer for Starr, said in the lawsuit.
“Although this might be a laudable goal, as a matter of basic law, the ends could not and did not justify the unlawful means employed,” he continued. “The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency.”
Starr Int’l, once AIG’s largest shareholder, is seeking damages for itself and other shareholders of at least $25 billion. The company claims the Fed of New York and AIG pushed AIG directors to violate their duties to Starr International and AIG.
AIG, whose stock price has tumbled 98% since the middle of fiscal 2007, when the insurer’s bets on mortgage debt through CDS began to deteriorate, is listed as defendant in the suits, which also seek damages for the company.