Stock Market Watch

AIG’s Former CEO Sues Government Over Bailout

by ·




Maurice Greenberg, former CEO of American International Group Inc. (NYSE: AIG), has sued the U.S. government over the bailout of the insurer during the financial crisis.

Greenberg sued the U.S. government for $25 billion, claiming that the takeover of the insurer by the government was unconstitutional. Greenberg filed the lawsuit through Starr International Co., a company he runs. In the lawsuit, which has been filed with the U.S. Court of Federal Claims in Washington DC, Greenberg’s Starr International said that in bailing out AIG during the financial crisis and taking an 80% stake, the government failed to compensate shareholders, violating the Fifth Amendment.


Under the Fifth Amendment, the government is barred from taking of private property for public use without just compensation.

In the lawsuit, Starr alleges that the government’s actions were ostensibly designed to protect the U.S. economy and rescue the country’s financial system and that 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. Starr further alleges that the U.S. is not empowered to trample shareholder and property rights even in the middle of a financial emergency.

Mark Herr, a spokesman for AIG, declined to comment on the issue, while the Treasury Department, which bailed out the insurer with taxpayers’ money has also not issued any comments yet.

The $25 billion compensation that Starr has asked for in the lawsuit is the value of the government’s stake in AIG on January 14, 2011. On that day, the government swapped AIG preferred shares for 562.9 million shares of AIG common stock.

Back in September 2008, AIG was bailed out by the U.S. government after the insurer faced a liquidity crunch due to its exposure to risky debt through credit default swaps. AIG was on the verge of collapse before it was bailed by the government. Greenberg, who worked with AIG for nearly four decades, left the insurer in March 2005.

More Posts by this author

edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


Tags:

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

You may also like...