Maurice “Hank” Greenberg today gained a Pyrrhic victory against the government in his effort to collect damages from the takeover of American International Group in 2008.
A federal judge ruled that government treated AIG “much more harshly than other institutions in need of financial assistance,” but awarded no damages.
Judge Thomas Wheeler of the U.S. Court of Claims in Washington ruled that “the government’s justification for taking control of AIG’s ownership and running its business operations appears to have been entirely misplaced” when it took control of 79.9 percent of AIG’s stock in return for $85 billion in cash.
However, Wheeler said, the “Achilles’ heel of Starr’s case is that, if not for the government’s intervention,” AIG would have filed for bankruptcy, and in a bankruptcy proceeding, AIG’s shareholders would most likely have lost 100 percent of their stock value. … However harshly or improperly the government acted in nationalizing AIG, it saved AIG from bankruptcy.”
Wheeler said that “a troubling feature” of his decision is that is that the Government is able to avoid any damages notwithstanding its plain violations of the Federal Reserve Act.
He said the obvious conclusion of his decision is that any time the government saves a private enterprise from bankruptcy through an emergency loan, as here, “it can essentially impose whatever terms it wishes without fear of reprisal.”
“The government often may ignore the conditions and restrictions” of the provision of the law that allowed it to take over AIG, Wheeler said, “knowing that it will never be ordered to pay damages.
“With some reluctance, the court must leave that question for another day,” Wheeler concluded.
Greenberg, through Starr International, a former unit of AIG, owns 13 percent of AIG.
He claimed in a lawsuit first filed in 2011 and refiled several times afterwards, that the way the federal government’s methodology in handled the bailout of AIG amounted “to an attempt to ‘steal the business’.”
InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].
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