It might be difficult, but it is totally appropriate, to voice sympathy for American International Group.

Indeed, a comprehensive study of AIG would serve as a cautionary tale of how management should carefully weigh how investment into activities outside the main business model of the company can have catastrophic consequences.

Specifically, AIG was a global marketing colossus in the insurance space whose reach and brand probably exceeded that of Lloyd’s until it decided to get into the credit default swap business, an activity which constituted at its peak just six percent of revenues.

It is sufficient to say that in order to again become a viable company, AIG had to shrink substantially, in the process selling off international subsidiaries at less than peak value that were the envy of competitors—and the governments that support them, indeed subsidize them.

AIG has generated a lot of angst for the insurance industry over the last several years, the result of tons of stories about huge government bailouts and the need to pay large bonuses and salaries to the people at AIG whose activities, mostly outside AIG’s core activities, resulted in huge losses for the company and its subsidiaries.

But the company and its employees have truly been victimized by being forced to publicly reject an invitation to join lawsuits against the federal government that challenge the way the government aided the company.

The lawsuits, seeking $25 billion, were filed in the Southern District of New York and the Court of Claims in Washington by Starr International, controlled by its former chairman and CEO, Maurice “Hank” Greenberg.

The suits claim that the government rescue of AIG was punitive because the Fed originally charged AIG an interest rate of 14 percent on its original $85 billion loan, and that the Fed unfairly paid counterparties to credit default swaps issued by AIG’s Financial Products subsidiary 100 cents on the dollar, when it was possible that the counterparties would have accepted less.

AIG rejected joining the lawsuits while it was launching an ad campaign thanking the taxpayer for bailing it out, noting that it had paid back the government, and that it was again a major player in the U.S. insurance market.

 AIG’s board was forced to act on the federal lawsuits through a peculiarity of Delaware law, where AIG is incorporated, that allows shareholders, such as its former chairman, to file “derivative” lawsuits on behalf of shareholders when a firm decides not to pursue a claim.

The documents say that AIG’s hand was forced because Starr International and Greenberg demanded that the board act.

The New York federal court lawsuit has been dismissed; the decision is now on appeal to the Second U.S. Circuit Court of Appeals.

However, court action in the D.C. lawsuit had been delayed many months while the AIG board debated a decision as to whether it would join the lawsuit, according to court papers.

When the issue came to light, members of Congress and the public jumped on AIG for even considering the action.

Little attention was given to the fact that AIG wanted nothing to do with the lawsuits; its board had repeatedly delayed action on whether to join, despite requests from the judges involved, as well as the Treasury Department, for a decision.

It is clear that Hank Greenberg is a visionary. But, he is not serving the company he created well by pursuing this lawsuit and, moreover, by demanding that AIG join in.

 By doing so, he is giving the impression that he is the only one capabile of running it, and if he isn’t allowed to run it his way, it should go out of business.

While contending that the lawsuit is on “solid ground,” it appears that Greenberg’s lawyer, David Boies, backed away from the brink in making it clear the day after AIG rejected joining the suit that Greenberg won’t sue AIG as a result.

The whole affair, including the lawsuit, is not in the best interest of AIG and its shareholders. The defendants in this case are U.S. taxpayers, i.e., the same people to whom AIG must sell its products.