A company run by former American International Group Inc. Chief Executive Hank Greenberg has filed a $25 billion lawsuit against the United States, claiming that the government takeover of the insurer was unconstitutional. In its Complaint, Greenberg’s Starr International Co. said that in bailing out AIG and taking a nearly 80% stake, the government failed to compensate existing shareholders. This, it says, violated the Fifth Amendment, which bars the taking of private property for public use without just compensation. Starr said:
The government’s actions were ostensibly designed to protect the United States economy and rescue the country’s financial system. Although this might be a laudable goal, as a matter of basic law, the ends could not and did not justify the unlawful means employed.
It was alleged further that the United States “is not empowered to trample shareholder and property rights even in the midst of a financial emergency.” The lawsuit was filed with the U.S. Court of Federal Claims in Washington, D.C., which handles lawsuits seeking money from the government. The $25 billion estimate reflects what Starr called the value of the government’s stake on Jan. 14, 2011, when it swapped AIG preferred stock for 562.9 million common shares.
Once the world’s largest insurer by market value, AIG accepted $182.3 billion in federal bailout money beginning Sept. 16, 2008. This was amid a liquidity crisis spurred by its exposure to risky debt through credit default swaps. The government’s stake in AIG has fallen to about 77%. AIG itself has sued Bank of America Corp for $10 billion over alleged losses on mortgage securities. Hank Greenberg left AIG in March 2005, after nearly four decades at the helm, amid questions by regulators over the company’s accounting practices. AIG in 2006 paid $1.64 billion to settle federal and state probes into its business practices, and in July 2010 agreed to pay $725 million to settle a shareholder lawsuit accusing it of accounting fraud and stock price manipulation.
Source: Insurance Journal
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