The board of American International Group will weigh Wednesday whether to join a lawsuit filed by former chairman Maurice "Hank" Greenberg that argues that the government was unfair to its shareholders through the way it conducted its bailout of AIG.
Lawyers for Greenberg at Boies, Schiller & Flexner LLP, in New York, lawyers for the Federal Reserve Bank of New York (FRBNY) at Debevoise & Plimpton, and lawyers for the Treasury Department will make presentations on both sides of the issue.
Officials at AIG and the New York Fed confirmed that they will appear at the meeting.
"This is a significant and complex business and legal issue," AIG said in a statement. "The AIG board of directors takes its fiduciary duties and business judgment responsibilities seriously."
Greenberg will be attending the board meeting, which starts at 10 a.m., according to Alison Preece, communications coordinator for Starr and Greenberg's lawyers. Several of the firm's lawyers will be presenting to the board, including David Boies, a senior partner, Preece said.
Someone close to the AIG board cautioned that AIG is unlikely to make a decision on the issue instantly, but should make a determination by the end of January.
The lawsuit was filed by Starr International, a company controlled by Greenberg that owned 12 percent of AIG at the time of the bailout, which occurred Sept. 16, 2008.
Starr filed two suits, one in New York federal court, and the other at the Federal Court of Claims, based in Washington, D.C. That court hears claims filed against the government.
The New York suit was dismissed out of hand Nov. 11. But, a $25 billion lawsuit making similar claims is pending in the Court of Claims, which is awaiting AIG's decision whether to join before deciding what to do.
The suits claim that the nature of the rescue was punitive because the federal government ultimately took control of 92 percent of AIG, although the original bailout, for legal reasons according to Fed lawyers at the time, was 79.9 percent.
Other allegations that the takeover cost was punitive was because the Fed originally charged AIG an interest rate of 14 percent on its original $85 billion loan, and that the Fed unfairly paid counterparties to credit default swaps issued by AIG's Financial Products subsidiary 100 cents on the dollar, when it was possible that the counterparties would have accepted less.
