Judge Rules Against United States in American International Group (NYSE:AIG) Lawsuit

In the lawsuit against American International Group (NYSE:AIG), a federal judge has said no to the United States’ request to dismiss a lawsuit that charged the company with $25 billion. The suit was submitted by Maurice Greenberg, who is the former chief executive officer of American International Group, regarding the government bailout of the insurance company. This dismissal of the United States government’s bid for rejecting the lawsuit clears the way for the company to continue with the trial, scheduled for September 29^th.

The judge of the United States Court of Federal Claims, Judge Thomas Wheeler, stated that the case filed by Greenberg’s Starr International Corp was in its own name as well as that of other investors of AIG. This lawsuit is in regards to complex economic and financial issues that call for examination and testimony from witnesses that are experts in the matter.

Judge Wheeler announced last week that the complexity of the lawsuit and the disagreements in facts in the document strongly point to the necessity of a trial.

According to people familiar with the matter, the trial is expected to go on for 6 weeks.

When asked for a request for comment, the spokesperson for the United States Department of Justice refused to issue one.

According to one of the lawyers representing Greenberg and Starr, said that the decision speaks for itself.

Starr is the largest shareholder of AIG with a stake of 12 percent. This was prior to the government bail out that rescued the insurance company on September 16^th, 2008. The company, based in New York, was suffering increasingly greater losses before the government stepped in.

After the bail out, the government initially took control of 79.9 percent of the company, and implemented a reverse stock split, which diluted existing shareholders.

Then Starr filed a lawsuit against the government in 2011. The company argued that the bailout, which amounted to $182.3 billion, was an illegal move because of the taking of the company’s shares, according to the fifth amendment of the Constitution of the United States.

Greenberg’s company had sued the Federal Reserve Bank of New York separately. This lawsuit was in regards to the role that the Federal Reserve Bank of New York took on, saying that the bank created a backdoor bailout for the banks on Wall Street that may have had any association with AIG.

However, according to the Second United States Circuit Court of Appeals in January, the New York Federal Reserve Bank had the power to take action in unusual and exigent situations, which included the rescuing of AIG from bankruptcy at the peak of the worst financial crisis of the modern time period.

In December of 2012, AIG finally finished paying back the bailout, which left taxpayers a profit of nearly $23 billion.

Greenberg, who is 89 years old, was the head of AIG for almost 40 years before his exit in 2005.

The Court of Federal Claims in Washington D.C. is the federal entity that handles suits against the government seeking money.