Greenberg’s Starr Sues U.S. for $25 Billion on AIG Bailout
“After obtaining control of AIG, the government used AIG as a vehicle to funnel funds to other institutions and to provide ‘back-door bailouts’ on disparate terms far more favorable to those institutions, including foreign companies,” Starr alleges in its complaint.
Starr filed a related shareholder lawsuit today in U.S. District Court in Manhattan, claiming the Federal Reserve Bank of New York and AIG forced or induced AIG directors and officers to violate their duties to Starr International and AIG.
Tim Massad, assistant secretary for financial stability at the Treasury Department, said in an e-mailed statement that the department is reviewing the lawsuit and expects to defend its actions.
AIG will be part-owned by the U.S. Treasury Department for ‘a very long time,’ Greenberg, who led the firm for about four decades though 2005, said Nov. 10 in an interview. Greenberg is chairman and chief executive officer of C.V. Starr & Co.
The Washington lawsuit claims the government violated Delaware law, a consent order of the Delaware court, representations made in securities filings, and provisions of the issuance of preferred stock to the government.
Thomas Merrill, a professor at Columbia Law School who specializes in property and constitutional law, said if the court finds for Starr, the case could resemble the U.S. Supreme Court decision on President Harry Truman’s seizure of steel mills during the Korean War. The high court in 1952 found the taking to be unconstitutional.
The federal claims case is Starr International Co. v. U.S., 11-779, U.S. Court of Federal Claims (Washington). The Federal Reserve case is Starr International Co. v. Federal Reserve Bank of New York, 11-8422, U.S. District Court, Southern District of New York (Manhattan).