US Treasury Will Offer “Vigorous Defence”
The US Treasury Department expects to “vigorously” defend its actions in the wake of the near-collapse of American International Group Inc. [AIG] in 2008, it said in a response to a suit by Bermuda-based Starr International Co. Inc. claiming Washington DC’s actions were unconstitutional.
In the suit filed Monday [Nov. 21] in the US Court of Federal Claims in Washington, Starr — a Bermuda private equity firm headed by former AIG CEO Maurice [Hank] Greenberg — alleges that by taking control of nearly 80 percent of AIG in 2008, the American government took the property and rights of AIG’s shareholders without compensation.
Beginning in 2008 “and continuing through at least January 2011, the government ignored the Constitution and singled out AIG common stock shareholders for discriminatory and unlawful treatment in clear violation of the takings, due process and equal protection clauses of the United States Constitution,” according to Starr’s suit.
The suit seeks at least $25 billion in damages for shareholders and AIG itself.
Later Monday, Starr also sued the Federal Reserve Bank of New York in federal court in New York, holding that the New York bank breached its fiduciary duty to AIG shareholders.
Tim Massad, assistant secretary for financial stability at the Treasury Department, issued a statement defending the government’s actions.
“It is important to remember that the government provided assistance to AIG—and stopped it from collapsing—in order to prevent a meltdown of the entire global financial system,” Mr. Massad said in the statement. “Our actions were necessary, legal and constitutional. We are reviewing the lawsuit and expect to defend our actions vigorously.”
Mr. Greenberg was chairman and CEO of AIG from 1968 until 2005 and has longstanding ties to Bermuda.
Shortly before he was forced to resign his positions following a probe by then New York State Attorney General Eliot Spitzer and a simultaneous drop in the company’s stock value, Mr. Greenberg was questioned about the insurance giant’s practice of registering more than 50 AIG entities in Bermuda.
Industry analysts and American lawmakers interpreted the Bermuda registrations as a deliberate attempt to avoid the ramifications of American securities-law disclosures and create an ownership structure immune to US business laws and taxation.
