Published January 09, 2013
American International Group's board of directors announced Wednesday that the bailed-out company will not join a lawsuit against the U.S. government -- after lawmakers repeatedly warned the firm not to bite the hand that fed it.
In announcing the decision not to join a shareholder lawsuit, board Chairman Robert Miller acknowledged the billions in taxpayer support provided to the company since the 2008 financial crisis.
"America invested in 62,000 AIG employees, and we kept our promise to rebuild this great company, repay every dollar America invested in us, and deliver a profit to those who put their trust in us," he said. "To date, AIG has returned $205 billion to America, including a profit of $22.7 billion. We continue to thank America for its support."
Starr International Co. Inc., the investment firm of former AIG CEO Maurice Greenberg, had filed the lawsuit in November 2011 on behalf of the firm and AIG shareholders.
The complaint asserts that the government didn't provide shareholders fair compensation when it took a nearly 80 percent stake in the insurer as part of its bailout.
AIG said that, by law, its board had to consider three options: take over the lawsuit and pursue the claims on its own; attempt to prevent the claims from being pursued by Starr; or allow Starr to continue to pursue the complaint on AIG's behalf.
AIG said Wednesday it would not join the suit or allow Starr to pursue claims "in AIG's name."
The decision came after a number of lawmakers warned AIG not to take any legal action considering the taxpayer support they received.
"I'm shocked to see AIG running commercials, celebrating its repayment of taxpayer-funded loans, and then turning around and slapping these same taxpayers in the face by considering joining this lawsuit. It is the American taxpayers and the federal government that are responsible for AIG's existence today," Rep. Jan Schakowsky, D-Ill., and other House lawmakers said in a letter issued before AIG's announcement.
U.S. Reps. Peter Welch, D-Vt., and Michael Capuano, D-Mass., also characterized the insurer as the "poster child" for Wall Street greed, fiscal mismanagement and executive bonuses.
"Taxpayers are still furious that they rescued a company whose own conduct brought it down. Don't rub salt in the wounds with yet another reckless decision that is on par with the reckless decision that led to the bailout in the first place," they wrote in an earlier letter to the company.
The mere fact that AIG was considering a lawsuit drew disbelief from economic officials. "We should counter-sue for stupidity," former U.S. Labor Secretary Robert Reich tweeted.
In widely reported comments, former inspector general for the financial industry bailout Neil Barofsky said AIG joining the suit would be a "giant middle finger" to the American taxpayer.
The suit seeks $25 billion in damages, and would have pitted the company against the government that rescued it in 2008 from collapsing under the weight of huge losses on mortgage-backed securities and other toxic assets.
The Court of Federal Claims denied a request by the U.S. to dismiss the lawsuit, which means the case will go forward regardless of AIG's participation.
The government came to the rescue of AIG in September 2008, at the depths of the financial meltdown. The New York company did business with hundreds of firms around the world, and officials feared its collapse would wreck the financial system.
All told, AIG's bailout was the largest of the Wall Street rescue packages.
Since the financial meltdown, AIG has undergone a significant restructuring which has cut the size of the company nearly in half aimed at focusing on its core insurance operations.
In 2010, the company spun off Asian life insurer AIA Group in Hong Kong's biggest ever initial public offering to raise $20 billion, which was used to pay bailout debt.
In November, AIG reported a third-quarter profit of nearly $2 billion thanks to strength in its insurance operations and investment returns. In the same period a year earlier it lost $4 billion.
The Treasury Department announced last month that it sold all of its remaining shares of AIG, ending up with $22.7 billion more than it funneled to the company during the height of the financial crisis.
The Associated Press contributed to this report.