Facing a backlash, AIG opts not to join $25B suit over bailout

The timing of the lawsuit is unfortunate for AIG, which has launched an ad campaign thanking America for rescuing it. RICHARD DREW / AP
The timing of the lawsuit is unfortunate for AIG, which has launched an ad campaign thanking America for rescuing it. RICHARD DREW / AP
Maurice "Hank" Greenberg, former CEO of AIG, heads the firm that filed the suit.GALLERY: Maurice "Hank" Greenberg,…
By Steve Rothwell, Associated Press
Posted: January 11, 2013

NEW YORK - Facing a backlash from Washington and beyond, American International Group won't join a $25 billion shareholder lawsuit against the U.S. government over the terms of its bailout at the height of the financial crisis.

The suit was filed by Starr International, a company headed by AIG's founder and former chief executive officer, Maurice "Hank" Greenberg. It alleges that the government took nearly all the insurer's stock as part of the bailout without giving investors proper compensation. The Treasury's $182 billion bailout of the insurer was the largest of the 2008 financial crisis.

The timing of the suit 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's joining the lawsuit had already triggered outrage. A congressman from Vermont issued a statement telling AIG: "Don't even think about it."

AIG, which was legally obligated to consider joining the lawsuit, demurred.

"The board of directors properly and fully executed our fiduciary and legal obligations to AIG and its shareholders," Robert S. "Steve" Miller, chairman of AIG's board of directors said in a statement Wednesday. "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."

AIG nearly imploded after making huge bets on mortgage investments that later went wrong. Regulators feared that if AIG were allowed to fail, that would send shock waves through the financial system, which was already reeling from the collapse of Lehman Bros.

Miller said in the statement that the insurer had returned $205 billion to the government, resulting in a profit of $22.7 billion for the United States.

Since the financial meltdown, AIG has undergone a restructuring that has cut it nearly in half. Its aim is to focus the company on its core insurance operations.

In November, AIG reported a third-quarter profit of nearly $2 billion thanks to strength in its insurance operations and investment returns. In the same period a year earlier, it lost $4 billion.

The Treasury Department announced last month it had sold all of its remaining shares of AIG.

Index by Keyword
|
Index by Date
|
About Philly.com
|
Contact Us
|
Terms of Use & Privacy Statement
|
Copyright 2013