Three years after the federal takeover of American International Group (NYSE:AIG), former Chief Executive Maurice R. “Hank” Greenberg is filing suit against the government, calling its move unconstitutional.
Starr International Co., a firm headed by Mr. Greenberg that was AIG’s largest shareholder at the time of the 2008 government rescue, filed a lawsuit with the U.S. Court of Federal Claims on Monday accusing the U.S. government of using AIG as a vehicle to ship cash to the insurer’s trading partners.
The suit alleges that the government took valuable property from Starr and other AIG shareholders in violation of the Fifth Amendment, which says that private property cannot be taken for “public use, without just compensation.” The government provided AIG with tens of billions of dollars in aid, in turn taking a nearly 80% stake in the company.
Starr is seeking damages of at least $25 billion for itself and other shareholders. AIG is listed as a “nominal defendant” in the suit, which also seeks damages for the insurer.
Though the value of Starr’s stake in AIG dropped steadily in the months before the federal takeover, it plummeted after the government stepped in, as did Greenberg’s personal stake in the company, which he left in 2005 as AIG came under pressure from authorities investigating an earlier accounting case.
The government made up to $182.3 billion in taxpayer funds available to AIG, which at its peak used over $130 billion of available funds. AIG has sold assets to repay large sums of the bailout, while the U.S. Treasury, which once owned 92.1% of the company, has decreased its share to 77% after selling shares to investors in May.
The Treasury is trying to recoup more than $41 billion from selling its remaining stake over time. To break even on its investment in AIG, the government has to sell its shares at around $28.73 each. While the Treasury sold its first batch of shares at $29, AIG was trading at just $20.94 a share today as of 12:25 p.m. EST.