A federal judge has cleared for trial a claim by Maurice “Hank” Greenberg, former chairman and CEO of American International Group (AIG), that the federal government acted inappropriately when it took control of AIG in September 2008. Greenberg, through Starr International, a former unit of AIG, owns 13 percent of AIG.
He claimed in a lawsuit first filed in 2011, and refiled several times afterwards, that the way the federal government’s methodology handled the bailout of AIG amounted “to an attempt to ‘steal the business’.”
The trial will begin Sept. 29. The case is being heard by Judge Thomas Wheeler in the Federal Court of Claims in Washington.
In a decision handed down Monday, Wheeler said that the case involves “complex financial and economic issues” that deserve analysis and testimony from qualified expert witnesses. He explained that, “based upon a review of the briefs and appendices, the Court finds that this is not a case to be decided on the papers without trial.”
He said that while the motion and response have provided a useful summary of the parties’ positions, “the Court needs to weigh the evidence, make credibility determinations, and draw legitimate inferences from the facts. The sheer volume of material presented is a testament to the complexity of the issues before the Court,” Wheeler said in his decision.
“The decision speaks for itself,” said Dawn Schneider, a spokesman for Greenberg’s lawyers at Boies, Schiller & Flexner in New York. “We decline to attempt to add to it.”
Greenberg seeks $25 billion from the federal government for himself and other AIG shareholders. Meanwhile, AIG has divorced itself from the case. The case stems from the government acquisition of 79.9 percent of the stock of AIG, with the approval of its board, in return for $85 billion in cash in September 2008. The Fed later provided additional aid to AIG through additional cash and creation of facilities in exchange for mortgage-backed securities either directly held by AIG or exchanged by holders of MBS, guaranteed by credit default swaps issued by AIG.
The federal government later paid the Fed for the stock, and then sold off its AIG holdings by September 2012 through a series of initial public offerings. The Fed has also sold off the securities held in the facilities it created.
It is estimated that the government provided its credit rating and more than $300 billion in cash before the Treasury Department ultimately sold stock in AIG acquired from the Fed in a series of public offerings that ended in December 2012. An economist estimated that, by the time the Fed and Treasury got through aiding AIG, the Treasury Department owned 92 percent of AIG’s stock.