The board of American International Group won’t be joining a $25 billion lawsuit that claims shareholders were harmed by onerous terms of the insurer’s government bailout.
The board announced its decision on Wednesday, report the New York Times Taking Note blog and the Associated Press. AIG has repaid the United States for the $182 billion bailout, resulting in a government profit of $22.7 billion.
A company run by one-time AIG chief executive Maurice Greenberg filed the suit in November 2011. The company, Starr International, once owned 12 percent of AIG. The complaint alleged the government charged “punitive” interest rates on its loans and enabled a “backdoor bailout” of the insurer’s Wall Street clients by using AIG money to pay off credit default swaps. Greenberg is represented by David Boies in the suit, which argues a Fifth Amendment takings violation.
AP spoke to Columbia law professor John Coffee about AIG’s decision. “The majority of directors decided that the reputational damage was greater than the possibility on a long-shot lawsuit,” he said.