* Ex-AIG CEO's company may sue over U.S. stake, stock split
* U.S., AIG win dismissal of derivative claim
* Size of Starr Int'l lawsuit grew in March to $55.5 billion
By Jonathan Stempel
June 26 A federal judge has allowed former
American International Group Inc Chief Executive Maurice
"Hank" Greenberg to continue his multibillion dollar lawsuit
against the United States over the insurer's bailout, but took
away some of his claims.
Judge Thomas Wheeler of the U.S. Court of Federal Claims
said Greenberg's Starr International Co may pursue claims over
the government's taking of a 79.9 percent stake in AIG in
September 2008 and a separate 1-for-20 reverse stock split in
The judge rejected the government's arguments that these
claims should be dismissed because the stake has already been
divested, and that such claims more properly belonged to AIG
itself because shareholders all suffered the same type of harm.
Wheeler nonetheless granted motions by the government and
AIG to dismiss "derivative claims" that Starr had asserted on
behalf of AIG, including over the insurer's refusal to help him
pursue the lawsuit.
AIG's board decided unanimously in January not to join
Starr's case after a public backlash, including from Congress.
Critics objected to the prospect that AIG might effectively
be asking taxpayers whose money helped save it from collapse
during the 2008 financial crisis to return billions of dollars.
While saying he was "troubled" that Treasury Department
lawyers may have pressured AIG to stay out of the lawsuit,
Wheeler said the board exercised its business judgment in an
"informed, transparent, rational, and exemplary fashion."
The judge ruled one day after New York's highest state court
said state Attorney General Eric Schneiderman may pursue an
unrelated case against Greenberg, 88, over an alleged accounting
fraud at AIG more than eight years ago.
Including the effect of the reverse stock split, AIG's share
price has fallen roughly 96 percent since the middle of 2007,
when credit market conditions began to tighten.
Starr once held a 12 percent stake in AIG, which had been
the world's largest insurer by market value prior to the
financial crisis and a $182.3 billion federal bailout.
Its lawsuit grew in March to roughly $55.5 billion in size.
This comprised $23 billion related to the 79.9 percent
stake, which was later swapped for 562.9 million common shares,
plus $32.5 billion of collateral that Starr said the government
gave away to help rid banks that dealt with AIG of toxic debt.
Starr has alleged that the bailout and related government
actions constituted an illegal taking that violated the 5th
Amendment of the U.S. Constitution.
David Boies, a lawyer for Starr, in a statement said he was
pleased that Wheeler let stand claims for "tens of billions of
dollars that the government took without just compensation
and/or illegally exacted."
AIG spokesman Jon Diat said the New York-based insurer is
pleased with the decision. U.S. Department of Justice
spokeswoman Allison Price declined to comment.
A trial could begin late next year.
Starr is separately appealing another judge's dismissal of
its related lawsuit against the Federal Reserve Bank of New
York. Wheeler, meanwhile, has previously awarded class-action
status to two groups of shareholders challenging the bailout.
Greenberg led AIG for nearly four decades before his 2005
ouster. On March 1, AIG eliminated the government's last
financial stake by repurchasing warrants.
AIG shares closed up 27 cents at $43.62 on Wednesday.
The case is Starr International Co. v. U.S., U.S. Court of
Federal Claims, No. 11-00779.