Former AIG CEO Hank Greenberg may very well become the new poster child for the Occupy Wall Street movement. Not only was Greenberg ousted in 2005 for allegedly cooking the books at the world’s former largest insurer, now he’s suing the U.S. Government, calling their takeover of the company unconstitutional.
Greenberg’s own company Starr International Co., was the largest shareholder in the firm before it collapsed and now Greenberg is arguing that by taking an 80% stake in the company the government violated Fifth Amendment protection against the seizure of private property for “public use, without just compensation.”
The lawsuit asks for $25 billion in damages based off the governments 80 percent stake in AIG which was awarded after the company was given $182 billion in bailout funds. Funding from the government was used to pay off counterparties including Goldman Sachs while still paying out $165 million in bonuses in 2008 despite fourth quarter losses of $61.7 billion.
After the government bailout AIG was forced to sell off assets to pay back the government, a fact that helped the company’s value plummet which in turn hurt Greenberg’s stake in the insurer.
It should be noted that in 2009 Greenberg was forced to pay the Securities and Exchange Commission $15 million for accounting violations relating to his horrendous accounting practices at AIG. Greenberg’s payment came three years after AIG was ordered to pay $1.64 billion to settle federal and state probes into its business practices and then another $725 million in 2010 to settle shareholder lawsuits accusing the company of stock price manipulation and accounting fraud.
It was under Greenberg’s “leadership” that AIG bet heavily on the housing market which led to the organization’s collapse.
Speakign about the government’s actions Starr employee David Boies noted:
“The government’s actions were ostensibly designed to protect the United States economy and rescue the country’s financial system.”
“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,” he continued. “The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency.”
In the meantime the following statement was released by a spokeswoman for the U.S. Treasury:
“It is important to remember that the government provided assistance to A.I.G. — and stopped it from collapsing — in order to prevent a meltdown of the entire global financial system,” Mr. Massad said. “Our actions were necessary, legal and constitutional. We are reviewing the lawsuit and expect to defend our actions vigorously.”
The lawsuits are filed under Starr International Co v. U.S., U.S. Court of Federal Claims, No. 11-00779; and Starr International Co v. Federal Reserve Bank of New York, U.S. District Court, Southern District of New York, No. 11-08422.
Do you think Greenberg has any chance at winning his case? The audacity of a CEO to cook his company’s books and then demand money from the government while claiming that the economy should be allowed to collapse because of his stupidity is beyond me.