Trial Begins in Maurice Greenberg’s Lawsuit Over AIG Bailout
October 1, 2014 by Jeff Jeffrey
WASHINGTON – Maurice “Hank” Greenberg will finally have his day in court in his multibillion-dollar lawsuit against the federal government that challenges the emergency bailout of American International Group Inc. during the financial crisis. The trial, which starts Sept. 29, is scheduled to last six weeks.
Greenberg, the former head of AIG, has asked a federal judge in Washington to rule that the government’s takeover of the company constituted an illegal taking without just compensation that violated the Fifth Amendment of the U.S. Constitution. Greenberg and Starr International Co. Inc., where he is now chairman and chief executive officer, claim the bailout cost Starr’s shareholders billions of dollars because their stake in AIG was wiped out when the federal government took over the company.If they win, Greenberg and Starr could recover more than $40 billion from taxpayers.
As part of the bailout, AIG was offered the $85 billion with a 14.5% annual interest rate as long as the federal government took control of AIG as controlling lender and shareholder. The bailout ultimately expanded to $184.6 billion, and the government stake peaked at 92%. AIG has since repaid the amount of the bailout.
Starr also alleges the federal government imposed a “reverse stock split” on AIG’s shareholders, which had the effect of diluting stock ownership and gave the government 80% control of the voting stock.
Lawyers for the federal government have argued AIG’s board agreed to the terms of the bailout. The government also alleges the company proposed the reverse stock split and the company’s shareholders agreed to the deal.
Last month, the U.S. Court of Federal Claims rejected the federal government’s effort to get the lawsuit thrown out before it went to trial (Best’s News Service, Aug. 27, 2014). In a brief Aug. 25 order, Judge Thomas Wheeler of the U.S. Court of Federal Claims denied the federal government’s request for summary judgment, saying there were too many disputed facts for the case to be decided without a trial.
Starr and Greenberg are being represented by David Boies, who garnered national fame when he represented then-Vice President Al Gore in the Bush v. Gore case before the U.S. Supreme Court.
