March 30 (Bloomberg) -- Maurice “Hank” Greenberg, the ex-American International Group Inc. chief executive officer, asked a judge to allow him to pursue his lawsuit seeking $25 billion from the U.S. over terms of the company’s 2008 bailout.
Greenberg’s Starr International Co., in a filing yesterday in the U.S. Court of Federal Claims in Washington, argued that the company has the right to seek compensation for itself and all AIG shareholders for what it alleges was an illegal taking of property by the government during the 2008 financial crisis.
“These unprecedented actions represented an extraordinary exercise of governmental power,” David Boies, Greenberg’s lawyer, wrote in the filing. “There is no basis for dismissing this case at this preliminary stage.”
The U.S. Justice Department on March 1 urged the court to dismiss the case, arguing Starr International lacks the authority to sue and has no claim. The department said AIG agreed to the bailout and Starr International shouldn’t be allowed in a court case to “rewrite” the insurer’s rescue agreement and make American taxpayers pay $25 billion more.
Starr International sued the government on Nov. 21, calling the public assumption of 80 percent of AIG stock in September 2008 a violation of the constitutional rights of shareholders to due process and equal protection of the law.
Starr, AIG’s largest shareholder at the time of the bailout, alleges that while the U.S. got so-called fairness opinions from banks on exchanging two groups of preferred stock, it failed to get such an opinion in exchanging a block of preferred stock for 562.9 million shares “for virtually nothing,” according to the complaint.
AIG was added as a “nominal” defendant in the case, meaning the company would be bound by any judgment.
The claims court handles cases against the federal government for money, including claims that the U.S. took private property for public use without just compensation in violation of the Fifth Amendment to the U.S. Constitution.
Also on Nov. 21, Starr sued the Federal Reserve Bank of New York, saying it breached its duty to AIG shareholders by loaning $85 billion at 14.5 percent while offering better terms to banks in a “backdoor bailout.”
AIG almost collapsed after bets tied to the housing market soured, and the bailout was revised at least four times before reaching $182 billion.
The federal claims case is Starr International Co. v. U.S., 1:11-cv-00779, U.S. Court of Federal Claims (Washington). The Federal Reserve case is Starr International Co. v. Federal Reserve Bank of New York, 1:11-cv-08422, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Tom Schoenberg in Washington at email@example.com
To contact the editor responsible for this story: Michael Hytha at firstname.lastname@example.org