AIG's board did not act "irrationally" in deciding not to join a lawsuit filed by a company controlled by former chairman and CEO Maurice "Hank" Greenberg alleging that the government inappropriately handled its rescue of AIG, the company said in a court filing Friday.
Both AIG and the government in separate motions asked the court to dismiss a lawsuit filed in 2011 by Greenberg and Starr that has already been amended twice.
The suit now alleges that the government owes AIG shareholders $25 billion because it "coerced" AIG's board to turn over control of AIG to the federal government in September 2008.
In its filing, AIG lawyers said the Greenberg/Starr case is not the "slam dunk" Greenberg and Starr think it is.
The filings were made in the U.S. Court of Claims in Washington, D.C., in a suit filed by Greenberg through Starr International, a company that at one point owned 12.3 percent of AIG.
In the latest filing, AIG lawyers said, "Whatever Starr may think, it was not irrational for AIG's board to conclude that the claims Starr seeks to bring in AIG's name are not the 'slam dunk' 'easy winners' Starr portrays; to the contrary, AIG's board was advised by its counsel (and experts on constitutional law and financial regulation) that Starr's likelihood of success is in fact low."
The suit should also be dismissed "because Starr has not alleged facts showing that AIG's board wrongfully refused Starr's demand that AIG bring the claims and has not alleged facts showing that demand was excused."
Further, the filing said, AIG's directors also recognized that AIG would face "incalculable harm" to AIG's corporate brand and image and relationships with shareholders, customers, regulators and elected officials if AIG pursued litigation against the government, and that this harm threatened to nullify the herculean efforts AIG and its employees have made to rebuild AIG's name and reputation following the events of September 2008 and repay the entire amount AIG owed the Government (plus a profit for the Government).
"Far from being irrational, these concerns were confirmed for the board by the wave of negative publicity triggered by the board's mere consideration of Starr's demand," the filing said.
"Starr may not be concerned about the harm AIG will suffer if AIG pursues claims
against the Government, but the balancing of potential benefits and potential harms of AIG's pursuit of this litigation is a business judgment for AIG's board of directors, not Starr," the filing said.
The filing added that, "AIG's directors had every right to decide, in the exercise of their business judgment, that suing the government for its rescue of AIG is not the right thing for AIG to do, and that AIG's interests are better served by focusing on the future and not joining litigation concerning the past."
Under well-settled Delaware law, "Starr cannot usurp the right of AIG's board to make this business judgment," the filing asserts.
