The AIG logo on the side of its headquarters building in New York City.(Photo: Mark Lennihan, AP)
NEW YORK -- Faced with the prospect of an angry backlash from the U.S.
public, American International Group announced Wednesday it won't join
shareholder lawsuits over the federal government's handling of the
insurance giant's $182 billion bailout at the height of the national
The decision represents a potentially major legal
setback for the 2011 lawsuits filed by Starr International, the
investment firm of former AIG CEO Maurice Greenberg. The lawsuits in the
U.S. District Court in New York and the U.S. Court of Claims allege the
U.S. government and Federal Reserve failed to provide adequate
compensation to Starr and other AIG shareholders while taking an 80%
stake in the insurance firm at the height of the financial meltdown in
The government launched the bailout when AIG faced economic
collapse as its multibillion-dollar bets on mortgage investments went
bad. Officials feared that an AIG bankruptcy, coupled with the earlier
bankruptcy by Lehman Bros., could cripple the U.S. economy.
that the government's actions were unconstitutional, the lawsuits seek
at least $25 billion in damages and attorney's fees in a legal showdown
between the corporate recipient of Wall Street's largest recession
bailout and its government savior of last resort.
After its board
of directors heard presentations from both sides Wednesday, AIG said it
"has determined to refuse Starr's demand (to join the lawsuits) in its
entirety, and will neither pursue these claims itself nor permit Starr
to pursue them in AIG's name."
"In considering and ultimately
refusing the demand before us, the board of directors properly and fully
executed our fiduciary and legal obligations to AIG and its
shareholders," said AIG Chairman Robert Miller. "To date, AIG has
returned $205 billion to America, including a profit of $22.7 billion.
We continue to thank America for its support."
The decision may
calm public anger building over the lawsuits. In a Tuesday letter to
Miller, Rep. Peter Welch, D-Vt., warned that "taxpayers are still
furious that they rescued a company whose own conduct brought it down.
Don't rub salt in the wounds with yet another reckless decision that is
on par with the reckless decisions that led to the bailout in the first
But David Boies, Starr International's lead attorney in
the lawsuits, voiced regret over the AIG board's decision and said the
cases would continue.
"We continue to believe that the attempt by
the AIG board to prevent Starr International from pursuing claims on
behalf of AIG shareholders is contrary to the shareholders' interests,"
Boies said. "Whether or not the AIG board will be successful in blocking
Starr's efforts to recover damages for their shareholders will
ultimately be decided by the court."
The U.S. District Court in
Manhattan in November dismissed the case filed there, but Starr
International has filed a notice of appeal to that ruling. The U.S.
Court of Claims in July denied government motions to dismiss the action
AIG shares ended trading up 11 cents Wednesday at $35.76.