David Boies, the attorney suing the U.S. over American International Group Inc. (AIG:US)’s bailout, said the firm’s takeover was an abuse of authority similar to firefighters seizing possessions they rescued from a flood.
“The fire and rescue people say we’re going to cart them out, we’re going to protect them, but we’re going to take 80 percent of them for the firehouse,” Boies said in an interview today on CNBC. “Everybody would know that was wrong. It’s also illegal.”
AIG yesterday opted against joining former Chief Executive Officer Maurice “Hank” Greenberg in a $25 billion lawsuit that says the U.S. violated shareholders’ rights by taking over AIG in 2008 in a bailout designed to save the economy from collapse. CEO Robert Benmosche said the company is working to distance itself from the rescue and serve clients.
“There are limits to what the government can demand in return for” rescue loans, said Boies, who represents Greenberg’s Starr International Co. “What it cannot demand, as a court in Washington, D.C. has already ruled, is that the company give up its equity.”
Boies, chairman of Boies, Schiller and Flexner LLP, said he plans to take depositions from Treasury Secretary Timothy F. Geithner and former Treasury Secretary Henry Paulson. He said he won’t sue New York-based AIG over the board’s decision to reject Greenberg’s suit.
The lawyer said the government made the right move to extend credit to stabilize the company and had no need, or legal authority, to seize equity, because the loans were secured by the insurer’s assets. The U.S initially took a stake of 80 percent, and the holding climbed to 92 percent as the aid package swelled to $182.3 billion. The insurer repaid the assistance last year.
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