Feb. 1 (Bloomberg) -- Maurice “Hank” Greenberg, the former American International Group Inc. chief executive officer, revised his lawsuit seeking $25 billion over the U.S. takeover of the insurer, claiming a banker said the government wanted to “steal” the business.
The amended complaint, filed yesterday in the U.S. Court of Federal Claims in Washington, quotes an unidentified banker hired to represent the Federal Reserve Bank of New York during bailout discussions in 2008.
“These guys are going to try and steal the business,” the banker said to an AIG representative, according to the complaint.
Greenberg’s Starr International Co. sued the government Nov. 21, calling the public assumption of 80 percent of stock in the insurer in 2008 an unconstitutional “taking” of property that requires $25 billion in compensation.
U.S. Claims Judge Thomas Wheeler yesterday ordered that AIG be notified that it was added as a “nominal” defendant in the case, meaning the company would be bound by any judgment.
The revised complaint buttressed earlier claims that the U.S. taking of 562.9 million shares of AIG common stock was illegal. Starr claims 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.”
Starr, AIG’s largest shareholder at the time of the bailout, claims that in the midst of the financial crisis in September 2008, the U.S. took 80 percent of AIG’s equity while violating the constitutional rights of shareholders to due process and equal protection of the law.
Alison Preece, a spokeswoman for Starr’s lawyers at Boise, Schiller & Flexner LLP, declined to comment on the amended lawsuit. Charles Miller, a Justice Department spokesman, couldn’t immediately comment on the revised lawsuit.
The U.S. has until March 1 to file a motion to dismiss the case.
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.
Starr argues that AIG was caught in a liquidity crisis hastened by the Fed’s denying the insurer access to lending through its so-called discount window.
The central bank struck the AIG equity deal a day after the Lehman Brothers Holdings Inc. bankruptcy on Sept. 15, 2008. Starr claims the U.S. could have lent money without demanding equity, as it did with foreign banks and other lenders.
On Nov. 21 Starr also 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).
--Editors: Peter Blumberg, Michael Hytha
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