Facing backlash, AIG won’t join lawsuit against US
NEW YORK (AP) – Afraid of looking like a world-class ingrate, AIG on Wednesday decided against suing the federal government over the $182 billion bailout that saved the giant insurance company from collapse.
American International Group Inc was put in the awkward position of having to consider joining a lawsuit brought against Uncle Sam by its former CEO, Maurice “Hank” Greenberg.
Businessmen walking past American Inter-national Group Inc offices in Tokyo, Japan. EPA
The suit claims that the terms of the taxpayer-funded bailout were too onerous. The government received a huge stake in AIG when it bailed the company out at the height of the 2008 financial crisis. AIG has since paid all the money back and notes that the government made a profit of $22.7 billion.
The timing could hardly have been worse for AIG. The company is in the midst of a “Thank You, America” ad campaign to show its gratitude for being rescued from the brink of collapse.
The prospect of the insurer joining the lawsuit had already triggered outrage. A congressman from Vermont issued a statement telling AIG: “Don’t even think about it.” Comedian Andy Borowitz likened the insurer to somebody suing a fireman for ripping a designer jacket after rescuing them from a burning building.
AIG, which was legally obligated to consider joining the lawsuit, demurred. The company said it would not join Greenberg’s lawsuit and wouldn’t permit Greenberg to pursue his claims in AIG’s name.
“The majority of directors decided that the reputational damage was greater than the possibility on a long-shot lawsuit,” said John Coffee, a professor at Columbia Law School who specializes in corporate and securities law.
AIG’s CEO Bob Benmosche told CNBC in a televised interview that the company would be better off in the long run without the “headwinds” of the lawsuit and should look forward, rather than focusing on the past.
“It’s not acceptable socially for AIG to take the money and go back and sue the government,” Benmosche said in the CNBC interview. “A deal is a deal.”
David Boies, an attorney who represents Greenberg’s company, Starr International, said in a statement that AIG’s attempt to prevent Starr from pursuing its claim was against the interest of the company’s shareholders.
The insurer nearly imploded after making huge bets on mortgage investments that later went wrong. Regulators were concerned that if it were allowed to fail it would send shock waves through the financial system, which was already reeling as Lehman Brothers collapsed.
