American International Group Inc. (AIG) said it has a duty to weigh joining a suit by former Chief Executive Officer Maurice “Hank” Greenberg that claims the insurer's 2008 U.S. bailout was unconstitutional.
“The board of directors has fiduciary and legal obligations to the company and its shareholders to consider the demand served on us,” CEO Robert Benmosche said yesterday in a statement.
The board is scheduled to meet today to hear arguments from representatives of Greenberg and the U.S. Lawmakers including Senators Elizabeth Warren and Robert Menendez and Representative Peter Welch said New York-based AIG shouldn't join the suit.
“Taxpayers are still furious that they rescued a company whose own conduct brought it down,” Welch said in a letter to AIG Chairman Steve Miller. “Don't rub salt in the wounds with yet another reckless decision.”
Greenberg's investment firm Starr International Co., an AIG shareholder, filed the suit in 2011. Starr claims the rescue cheated investors by diluting their stakes.
AIG accepted a rescue that swelled in value to $182.3 billion after it couldn't raise money in equity and bond markets to pay clients who bought protection against losses on mortgage- related securities.
Greenberg is pursuing some of his claims in AIG's name, and the insurer has three options to respond, according to yesterday's statement. It can take over those claims and litigate them itself, allow Greenberg to prosecute them on its behalf, or prevent him from prosecuting the claims.
Greenberg is likely to challenge a decision blocking him from proceeding, AIG said in the statement, which came after the New York Times reported on the case.
“It is the AIG board's obligation and intention to consider seriously Starr's demand and respond to it in a manner that the board believes is in the best interest of the company,” AIG said.
The board will review presentations by the U.S. Treasury Department, Federal Reserve Bank of New York and Starr as directors work toward a decision by the end of this month. Suing the U.S. could present a public-relations challenge for the insurer, which has been running ads thanking taxpayers after repaying the bailout, which included funds from the Troubled Asset Relief Program, last year.
“AIG has paid back its debt to America with a profit, and we mean it when we say thank you to the American people,” Benmosche said in yesterday's statement.
Joe Courtney, a Democratic congressman from Connecticut, mentioned the latest advertising push as he took to Twitter Inc.'s website yesterday to rebuke AIG for weighing the suit.
“AIG ads thanking America ring hollow,” he wrote. “Choice was TARP or bankruptcy. Suit is garbage.”
Greenberg won a federal judge's approval to proceed with the case against in July. In the complaint, Starr said the government paid $500,000 for an AIG stake that was worth $25 billion, violating the constitutional rights of shareholders to due process and equal protection of the law. A parallel case against the New York Fed was dismissed in November.