Two groups of American International Group Inc. shareholders won class-action status from a federal judge last month in a $25 billion lawsuit by former Chief Executive Hank Greenberg over losses allegedly caused by the U.S. government’s bailout of the giant insurer. U.S. Court of Federal Claims Judge Thomas Wheeler also appointed David Boies, of Boies, Schiller & Flexner, as lead counsel for the classes. Starr International Co., once AIG’s largest shareholder with a 12 percent stake, sued the United States in 2011 over what eventually became a $182.3 billion bailout for the New York-based insurer.
It’s alleged in the lawsuit that by taking a 79.9 percent AIG stake and then conducting a reverse stock split without letting existing shareholders vote, the government conducted an illegal taking that violated the 5th Amendment of the U.S. Constitution. Citing Boies’ estimate that “tens of thousands” of shareholders might be affected, Judge Wheeler said “class certification is by far the most efficient method of adjudicating these claims.” The judge distinguished the case from the U.S. Supreme Court’s 2011 rejection of class status for more than one million Wal-Mart Stores Inc. workers alleging gender bias. Judge Wheeler said the AIG claims are “based on the same exact government action,” rather than “literally millions” of separate actions.
One class includes AIG shareholders as of Sept. 22, 2008, when a credit agreement awarding the 79.9 percent stake took effect. The other class includes shareholders as of June 30, 2009 who were denied a chance to vote on the reverse split. AIG elected on Jan. 9 not to join Greenberg’s lawsuit. Congress and the public were greatly upset over the prospect that AIG would consider suing the same entity that rescued it from collapse.
Greenberg has appealed a Nov. 19, 2012 dismissal of a related lawsuit in Manhattan federal court against the Federal Reserve Bank of New York. On March 1, AIG bought back warrants from the Treasury Department, eliminating the government’s last financial interest in the insurer. The case referred to above is Starr International Co. v. U.S., U.S. Court of Federal Claims, No. 11-00779.
Source: Insurance Journal
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