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VOL. 37 | NO. 1 | Friday, January 4, 2013
Facing backlash, AIG won't join lawsuit against US
NEW YORK (AP) — Facing a certain backlash from Washington and beyond, American International Group won't be joining 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 of the insurer's stock as part of its bailout without giving investors proper compensation. The $182 billion bailout of the insurer by the Treasury 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 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 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.
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 U.S.
Since the financial meltdown, AIG has undergone a restructuring that has cut its size nearly in half. Its aim is to focus the company on its core insurance operations.
In 2010, the company spun off Asian life insurer AIA Group in Hong Kong's biggest ever initial public offering to raise $20 billion, which was used to pay bailout debt.
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 that it sold all of its remaining shares of AIG.