(Bloomberg) — The judge weighing a $25 billion investor lawsuit over the 2008 bailout of American International Group Inc. challenged U.S. arguments that assuming control of the insurer didn’t amount to taking shareholder property.
Maurice “Hank” Greenberg’s Starr International Co., AIG’s largest shareholder before the bailout, contends the terms of the initial $85 billion rescue loan illegally gave the government an 80 percent equity stake in the insurer.
U.S. Court of Federal Claims Judge Thomas Wheeler, who sided with Starr several times during an eight-week trial last year, questioned a government lawyer’s contention during closing arguments Wednesday that there wasn’t an illegal taking of shareholder property when the bailout began on Sept. 16, 2008.
“There’s no question in anybody’s mind that there had been a change in ownership of AIG corporation,” Wheeler said. “The government is in there running the show. There’s no doubt about that.”
“How can it be that there wasn’t some sort of illegal exaction or taking for that to happen?” Wheeler asked Kenneth Dintzer, a Justice Department lawyer. It was one of several exchanges in which the judge balked at government explanations of its legal authority to demand equity for the bailout.
Obligated to taxpayers
Dintzer said the government was obligated to taxpayers to oversee the loan and “see where the money is going. It came in to monitor and help.”
Dintzer said the AIG board consented to the government’s conditions as a preferable alternative to bankruptcy.
“Starr’s claims have a lot of amnesia about them,” Dintzer said. “They’ve forgotten the risks and expense the taxpayers undertook to rescue AIG.”
Dintzer’s comments came near the end of the last day of the trial, capping years of skirmishing over a 2011 case filed in a court that specializes in claims against the federal government.
Wheeler promised a ruling “in the relatively near future.” To accommodate a large crowd, closing arguments were held in a courtroom of the U.S. Court of Appeals for the Federal Circuit, a larger space than Wheeler’s regular courtroom and the likely next stop for the case following his decision.
The 89-year-old Greenberg was among the spectators. He was listed as a possible witness but wasn’t called and didn’t attend the witness portion of the trial, which began in late September and ended just before Thanksgiving. He declined to comment on the case as he exited the courtroom.