Breaking News: AIG Board Decides Not to Pursue Lawsuit against the U.S. Government

By Stevie Duffin Updated on 1/9/2013

By Daniel Duffield

According to sources informed of the decision, directors for American International Group Inc. came to an early agreement regarding the Greenberg lawsuit against the federal government, deciding against litigation that alleged that the U.S. government took unfair advantage of the company with the $182 billion bailout during the financial crisis at the turn of the last decade.

The lawsuit began in 2011 in federal claims court, with Starr International, the company owned by the former chief executive of AIG Hank Greenberg, sought $25 billion in compensation for AIG and its shareholders. Starr requested AIG participation in the suit, and the AIG board met Wednesday to determine the company’s course of action.

News of this meeting was met with a whirlwind of criticism from the public that the insurer was turning against the government which had previously rescued them from impending bankruptcy; such a large response had not been seen since the 2008-09 crisis in the public’s reaction to post-bailout bonuses.

With these criticisms fresh in mind, AIG directors began discussion on Wednesday’s meeting with inclinations of rejecting Starr’s request, according to people familiar with AIG board directors. These informed few stated that pursuing litigation would have potentially hampered AIG’s attempts at reconstructing its reputation.

In December, the U.S. concluded the bailout by selling off its last remaining shares of AIG. On January 1^st, AIG even launched a series of advertisements thanking U.S. taxpayers for funding the bailout and for the recovery that had occurred.

In preparation for Wednesday’s meeting, AIG directors met on Tuesday night for dinner for a simulation of the litigation, in which the successful lawyers representing Starr, the U.S. Treasury, and the Federal Reserve were anticipated to present the facts of the issue to aid in a decision the following day.