Starr International Co. – the insurance intermediary firm controlled by Maurice R. “Hank” Greenberg, former longtime chairman and CEO of American International Group – has filed a $25 billion suit against the federal government claiming the September 2008 bailout of the failed insurer, in which the U.S. Treasury Department took a nearly 80% share of the company, represented an unconstitutional takings of private property without just compensation.
That initial $85 billion line of credit from the Federal Reserve Bank of New York eventually ballooned to $182.3 billion in loans, guarantees and liquidity programs, and the government’s stake grew to more than 92%. But Starr, which was the largest AIG shareholder at the time of the initial intervention, contends in a suit filed in the U.S. Court of Federal Claims that it should be compensated the value of the preferred shares Treasury held on Jan. 14, 2011, when those were swapped for562.9 million AIG common shares.
“The Government’s actions were ostensibly designed to protect the United States economy and rescue the country’s financial system,” the suit says. “Although this might be a laudable goal, as a matter of basic law, the ends could not and did not justify the unlawful means employed by the Government to achieve that goal.”
Treasury has since reduced its stake in the insurer to roughly 77% and hopes to raise $41 billion by selling its remaining shares over time.