This is not going to play well with the public.
On Wednesday, the board of the insurance giant A.I.G. will convene to consider joining a $25 billion shareholder lawsuit against the government. Taxpayers once owned around 92 percent of AIG. The company only recently paid taxpayers back and launched a “Thank You America” campaign.
The lawsuit, filed in 2011 by 87-year-old former CEO Maurice Greenberg, a major investor and AIG head for decades, claims that the terms of the massive bailout were too harsh. The suit alleges that shareholders were cheated by the high interest and the limitations on the firm (including compensation caps) were too harsh.
Greenberg believes that without government interference AIG the company would be $25 billion ahead of where it is right now.
The suit alleges that by getting a nearly 80% stake in AIG in exchange for providing tens of billions of dollars in aid, the government took valuable property from Starr and other AIG shareholders in violation of the Fifth Amendment, which says that private property can???t be taken for ???public use, without just compensation.??? Starr seeks damages for itself and other shareholders of at least $25 billion.
According to the New York Times:
Frank Partnoy, a former banker who is now a professor of law and finance at the University of San Diego School of Law told DealBook:
???On the one hand, from a corporate governance perspective, it appears they???re being extra cautious and careful. On the other hand, it???s a slap in the face to the taxpayer and the government.???
Naturally, mainstream media is framing this solely as a case of corporate greed and ingratitude. Even if that’s correct, I’m not sure that Greenberg’s quest is without merit. Some people might find it important to place limits on the ability of government to restrict private industry and strip shareholders of their due process and equal protection rights — government certainly doesn’t.