Bernanke Can Be Deposed in AIG Bailout Suit, Court Rules

Federal Reserve Chairman Ben S. Bernanke will have to give testimony in a lawsuit against the U.S. brought by Maurice “Hank” Greenberg over the government’s bailout of American International Group Inc. (AIG)

Greenberg’s Starr International Co. sued the U.S. for $25 billion in 2011, claiming the assumption of 80 percent of AIG’s stock by the Federal Reserve Bank of New York in September 2008 was an unconstitutional seizure of property that violated shareholders’ rights to due process and equal protection of the law. Switzerland-based Starr contended Bernanke’s role in the transaction made his testimony critical.

“The court is persuaded that Mr. Bernanke is a key witness in this case and that his testimony will be highly relevant to the issues presented,” Judge Thomas Wheeler of the U.S. Court of Federal Claims wrote in the ruling today. “Because of Mr. Bernanke’s personal involvement in the decision-making process to bail out AIG, it is improbable that the plaintiff would be able to obtain the same testimony or evidence from other persons or sources.”

Wheeler, who said he will attend the deposition to provide judicial oversight, said obtaining testimony from high-level U.S. officials has been a “relatively routine practice” in claims court when the individual has personal knowledge of relevant information.

Cheney Testimony

Then-serving officials who have testified in claims court proceedings include Secretary of Defense Dick Cheney, Colin Powell, chairman of the Joint Chiefs of Staff, and William Casey, director of the Central Intelligence Agency, Wheeler said in the ruling.

“We are pleased that the court has permitted us to take Mr. Bernanke’s deposition,” Alanna Rutherford of Boies, Schiller & Flexner, which represents Starr, said in an e-mailed statement. “This case seeks compensation for the stock of AIG shareholders that the U.S. government took in 2008 without authorization and without compensation.”

Bernanke, 59, was served with a notice of deposition on June 21 by Starr. The company proposed questioning him on Aug. 16. Wheeler said the date is acceptable to him while deferring to Bernanke’s schedule in coordinating a date.

Joe Pavel, a spokesman for the Federal Reserve Board in Washington, declined to comment on the ruling. Allison Price, a spokeswoman for the U.S. Justice Department, also declined to comment.

The government argued that whatever Bernanke has to say is available from other sources, including Board of Governors meeting minutes and the depositions of lower-ranking officials, according to a Justice Department filing on July 16.

Greenberg, 88, stepped down as AIG’s chairman and chief executive officer in 2005 during an investigation linked to an accounting scandal.

The case is Starr International Co. v. U.S., 11-cv-00779, U.S. Court of Federal Claims (Washington).

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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