Maurice “Hank” Greenberg, the former chief executive of American International Group Inc., took aim at the U.S. government and the Federal Reserve Bank of New York, filing a lawsuit Monday for $25 billion and claiming the 2008 federal takeover of AIG was unconstitutional.
At the height of the financial crisis, the government made about $182.3 billion in bailout money available to the floundering insurer. And last year, the Treasury Department increased that number to 92.1 percent after converting its preferred shares into common shares.
According to the lawsuit, until the government took about an 80 percent stake in AIG in exchange for providing aid, Starr International, Greenberg’s company, was AIG’s largest shareholder. The lawsuit claims the government took advantage of the insurance giant and violated the Fifth Amendment, which includes a “takings clause,” saying private property can’t be taken for “public use, without just compensation.”
“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 complaint. “The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency.”
The Treasury Department is expected to review the matter.
“The government provided assistance to AIG – and stopped it from collapsing – in order to prevent a meltdown of the entire global financial system,” said Tim Assad, assistant secretary for financial stability, in a statement. “Our actions were necessary, legal, and constitutional.”
AIG is listed as a “nominal defendant” in the suit, and seeks damages for the company.
