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AIG Board Won’t Sue U.S. Government Over Bailout

By Valentin Schmid
Epoch Times Staff
Created: January 11, 2013 Last Updated: January 11, 2013
Related articles: Business » Companies
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A file photo shows the logo of American International Group Inc. outside its office in the lower Manhattan area of New York. (Stan Honda/AFP/Getty Images)

A file photo shows the logo of American International Group Inc. outside its office in the lower Manhattan area of New York. (Stan Honda/AFP/Getty Images)

The board of directors of AIG announced Jan. 9 that it will not participate in a lawsuit seeking $25 billion in compensation from the U.S. government for damaging shareholder interest in the 2008 bailout.

“In considering and ultimately refusing the demand before us, the Board of Directors properly and fully executed our fiduciary and legal obligations to AIG and its shareholders,” said Robert Miller, the AIG chairman of the board of directors.

The lawsuit is being brought forward by Starr International, an insurance company previously controlled by Cornelius Vander Starr who also founded AIG. The current star CEO Maurice Greenberg, who ran AIG until 2005, is representing the company, which still holds 9 percent of AIG stock.

We continue to thank America for its support.

—Robert Miller, AIG Chairman

Greenberg and Starr claim that government aid in the form of equity injections from the Treasury and loans from the New York Fed put existing shareholders at a disadvantage. Both government entities together injected more than $182 billion into AIG to prevent it from collapsing in the fall of 2008. AIG was at the risk of failure because its derivative bets on subprime mortgages went sour.

Starr alleges that interest charged was too high and that equity investments went too far, diluting existing shareholders’ stakes, mainly to transfer funds to banks and other financial institutions that AIG owed money to.

In December 2012, the Treasury sold all remaining shares of AIG and announced that the total return, including interest payments on Fed loans, had been $22.7 billion.

Not Acceptable Socially
“America invested in 62,000 AIG employees, and we kept our promise to rebuild this great company, repay every dollar America invested in us, and deliver a profit to those who put their trust in us. To date, AIG has returned $205 billion to America, including a profit of $22.7 billion. We continue to thank America for its support,” said Miller.

AIG CEO Benmosche said that joining the suit against the U.S. government would not have been “acceptable socially.”

The mere possibility of suing the government had sparked an intense backlash from the media and ordinary citizens, yet AIG claims it had to at least consider the proposal due to shareholder rules and regulations.

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