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Ex-AIG CEO Greenberg can pursue suit against the U.S. government

The former executive accuses the government of violating shareholders’ property rights during the financial crisis

It’s been a bit of an up-and-down week for ex-American International Group (AIG) CEO Hank Greenberg.

Just days ago, New York’s Court of Appeals denied the former executive’s bid to dismiss a lawsuit that accuses him of orchestrating sham transactions to hide his company’s financial problems. But Greenberg got some better news on Wednesday, when a federal judge ruled that he can pursue his own $25 billion lawsuit against the U.S. government.

Judge Thomas Wheeler ruled that Greenberg and other AIG shareholders had adequately demonstrated that they “suffered a direct and substantial impact to their own property rights” when the U.S. government took over a nearly 80 percent stake in AIG as a condition of giving the failing insurance company $182.3 billion in bailout money.

Before the government bailout, Greenberg’s own company, Starr International Co., was AIG’s largest shareholder. The government’s decision to take over such a large portion of the company violated the Fifth Amendment, which contains a “takings clause” stipulating that the government cannot take private property for “public use, without just compensation.”

Wheeler did dismiss several “derivative claims” that Greenberg made, including one that blamed AIG for failing to help him in his litigation against the government. AIG declined to join Greenberg’s lawsuit earlier this year, following public uproar over the case.

For more InsideCounsel coverage of AIG, see:

EX-AIG CEO Greenberg seeks dismissal of case

N.Y. attorney general drops damages claim against ex-AIG CEO

Settlement possible in AIG fraud case

AIG will not sue U.S. over bailout terms

AIG sues former ILFC head for theft of company secrets

Alanna Byrne

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