Thursday, 24 November 2011
US Treasury vows to defend itself against Greenberg suit
A senior US Treasury Department official told The New York Times this week that the government would ‘vigorously’ defend itself against a lawsuit filed by former AIG CEO Hank Greenberg that reportedly states the 2008 takeover of AIG was unconstitutional.
Former AIG CEO Hank Greenberg
The Wall Street Journal reported earlier this week that Starr International, the insurer led by Mr Greenberg, AIG's largest shareholder at the time of the bailout, had filed a lawsuit on Monday in the US Court of Federal Claims.
The newspaper said that the action accuses the US government of using the giant insurer as a vehicle to hand cash to AIG's trading partners.
It added that the suit alleges that by taking a stake of nearly 80% in AIG in exchange for billions of dollars in aid, the government took valuable property from Starr and other AIG shareholders in violation of the Fifth Amendment. This states that private property cannot be taken for ‘public use, without just compensation’.
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"The government's actions were ostensibly designed to protect the United States economy and rescue the country's financial system," the suit says, according to The Wall Street Journal. “Although this might be a laudable goal, as a matter of basic law, the ends could not and did not justify the unlawful means employed by the government to achieve that goal."
Starr reportedly seeks damages for itself and other shareholders of at least $25bn. AIG is reportedly listed as a ‘nominal defendant’.
According to The New York Times, a spokeswoman for the Treasury provided a statement about the suit from Tim Massad, assistant secretary for financial stability. “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 is reported to have said. “Our actions were necessary, legal and constitutional. We are reviewing the lawsuit and expect to defend our actions vigorously.”
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