Maurice “Hank’ Greenberg, who won what most considered a long-shot case with a ruling that the U.S. government acted illegally towards American International Group Inc. shareholders in the terms it imposed for its bailout in 2008, is appealing that ruling because it did not award any damages.

U.S. Court of Claims Judge Thomas Wheeler on June 15 ruled in favor of Greenberg’s Starr International and shareholders that the government’s taking of AIG stock as part of the $85 billion bailout was illegal, but rejected Greenberg’s claim that AIG investors were entitled to compensation as a result.

Greenberg, CEO of Starr and an AIG shareholder, issued a statement on June 16 through the public relations firm of his lawyer, David Boies, saying they “respectfully disagree” with the part of Wheeler’s ruling holding that there is no remedy for the government’s illegal conduct. They said they will ask the court of appeals to “confirm that the Government is not entitled to keep billions of dollars of citizens’ money in its pocket.”

In his ruling, Wheeler said that shareholders were not due damages because if the government had not intervened, AIG would have filed for bankruptcy and AIG’s shareholders “would most likely have lost 100 percent of their stock value.”

The statement from Starr’s law firm argued that since the court recognized that requiring AIG shareholders to surrender 80 percent of their equity cost them more than $23 billion and improperly enriched the government, permitting the government to keep the money would allow it to “act illegally with impunity and without remedy or consequences.”

Federal Reserve

Starr and Greenberg said they are pleased with the part of the trial court decision that found that the “Federal Reserve acted illegally, discriminatorily, and for improper political purposes in requiring AIG, and AIG alone, to surrender 80 percent of their equity as compensation for a Federal Reserve loan.”

The Federal Reserve, which came in for criticism during the trial, defended its role in the bailout and supported the decision not to award damages.

“The Federal Reserve strongly believes that its actions in the AIG rescue during the height of the financial crisis in 2008 were legal, proper and effective,” the agency said in a June 15 statement released after the Wheeler decision was made public.

The Federal Reserve said the decision “recognizes that AIG’s shareholders are not entitled to compensation for that decision, and that the Federal Reserve’s extension of credit to AIG prevented losses to millions of policyholders, small businesses, and American workers who would have been harmed by AIG’s collapse during the financial crisis.”

Finally, the Federal Reserve defended the terms of the credit to AIG as “appropriately tough to protect taxpayers from the risks the rescue loan presented when it was made.”

*This story previously appeared in our sister publication Insurance Journal.

Topics AIG