News Update: AIG Refuses to Join Lawsuit Against Federal Government
Jan 9, 2013
The following article was published in Insurance Networking News on January 8, 2013 and updated today, January 9, 2013 to reflect that AIG has refused to join litigation against the federal government:
Insurance Networking News, January 8, 2013
UPDATE: The AIG Board of Directors will not spearhead litigation against the government, according to statement released by the company just after 3 p.m. this afternoon. The board also denied Starr International the right to pursue the claims in AIG’s name.
“In considering and ultimately refusing the demand before us, the Board of Directors properly and fully executed our fiduciary and legal obligations to AIG and its shareholders,” said Robert Miller, chairman of the AIG Board of Directors. “America invested in 62,000 AIG employees, and we kept our promise to rebuild this great company, repay every dollar America invested in us, and deliver a profit to those who put their trust in us. To date, AIG has returned $205 billion to America, including a profit of $22.7 billion. We continue to thank America for its support.”
AIG is expected to file a formal statement with the courts in the coming weeks detailing the decision.
Late Tuesday evening, AIG released a statement in which current CEO Robert Benmosche cites the Board’s “fiduciary and legal” obligation to the company and its shareholders to consider the lawsuit.
“Under applicable law, as well as according to certain court rulings, the AIG Board must consider and respond to Starr’s demand, and expects to do so by the end of January 2013,” the statement reads.
According to the release, Starr demanded the board either take over the lawsuit or allow Starr International Company, Inc. to continue to pursue it on AIG’s behalf. A third option, one which Starr would be likely to challenge, would be for the Board to refuse and prevent the claims from being prosecuted by Starr.
The statement also added that if AIG does not take up the claims and Starr prevails or obtains a favorable settlement, “AIG will not receive any of the amounts recovered.”
Benmosche anticipates a decision in the next “several weeks.”
A month after paying back government agencies owed for its $182 billion bailout, AIG is going to consider joining a 2011 lawsuit filed by AIG’s former CEO against those very same government agencies it just finished repaying, the New York Times reports.
The board members meet tomorrow and will discuss the $25 billion shareholder lawsuit posed by Maurice Greenberg, AIG’s former CEO. The lawsuit claims that shareholders were mistreated under the government’s watch and lost out on “tens of billions of dollars”; it also argues that the Fifth Amendment was violated, which prohibits private property being used for “public use, without just compensation,” according to the Times.
With this decision, the company finds itself in a precarious position. AIG’s reputation as well as that of the industry is tenuous in Washington, which wouldn’t be helped if the company joined the lawsuit at the risk of appearing ungrateful. Yet, there is pressure from Greenberg and shareholders to join the suit and push for a settlement. If a settlement is reached without AIG, according to reporting in the Times, “the company could face additional lawsuits from other shareholders.”
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