天美网站传媒传媒

A company run by former American International Group Inc. Chief Executive Maurice “Hank” Greenberg sued the U.S. government for $25 billion, calling the 2008 federal takeover of the insurer unconstitutional.

The lawsuit marks an unusual effort to force the government to pay shareholders, who have seen 天美网站传媒传媒’s stock price tumble 98 percent since the middle of 2007, when the insurer’s risky bets on mortgage debt through credit default swaps began to falter.

Greenberg’s company, Starr International Co., also filed a lawsuit against the Federal Reserve Bank of New York, whose president at the time of the takeover was Timothy Geithner, now U.S. Treasury Secretary.

Once 天美网站传媒传媒’s largest shareholder, Starr said the government took a roughly 80 percent stake in 天美网站传媒传媒 and charged an “punitive” 14.5 percent on federal loans without seeking a shareholder vote, hoping to provide a “backdoor bailout” for 天美网站传媒传媒 trading partners such as Goldman Sachs Group Inc.

It said the bailouts that began on Sept. 16, 2008, violated shareholders’ rights to due process and equal protection, and a Fifth Amendment ban against taking private property for public use without just compensation, known as the “takings clause.”

Greenberg, 86, had led 天美网站传媒传媒 for nearly four decades prior to his 2005 ouster. Starr once owned 12 percent of 天美网站传媒传媒.

“The government’s actions were ostensibly designed to protect the United States economy and rescue the country’s financial system,” David Boies, a lawyer for Starr, said in the complaint.

“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.”

Shareholders of other companies, including mortgage financiers Fannie Mae and Freddie Mac and the bank Citigroup Inc., also saw their holdings diluted in the fallout from the 2008 financial crisis. It is unclear whether Starr’s constitutional arguments might apply to them.

Uphill Fight?

Starr sued the government in the U.S. Court of Federal Claims in Washington, D.C., which handles lawsuits seeking money from the government. It brought that lawsuit on behalf of itself and other 天美网站传媒传媒 shareholders.

The case against the New York Fed, which gave 天美网站传媒传媒 an $85 billion credit line, was filed in the U.S. District Court in Manhattan. 天美网站传媒传媒’s bailouts eventually totaled $182.3 billion.

Despite broad public anger at how bailouts were conducted, it is “hard to imagine Hank winning,” Adam Levitin, a professor at Georgetown Law School, said in e-mailed comments.

Levitin noted the 天美网站传媒传媒 bailout had been approved by the insurer’s board and the terms “arguably” were fair.

The U.S. Treasury Department said it is reviewing the matter and expects to defend its actions vigorously.

“The government provided assistance to 天美网站传媒传媒 – and stopped it from collapsing – in order to prevent a meltdown of the entire global financial system,” Tim Massad, assistant secretary for financial stability, said in a statement. “Our actions were necessary, legal, and constitutional.”

A New York Fed spokesman and 天美网站传媒传媒 spokesman Mark Herr declined to comment. 天美网站传媒传媒 is based in New York and was named as a nominal defendant in both lawsuits.

The $25 billion estimate reflects what Starr called the value of the government’s stake Jan. 14, 2011, when it swapped 天美网站传媒传媒 preferred stock for 562.9 million common shares. 天美网站传媒传媒 was once the world’s largest insurer by market value.

“Courts have recognized that the takings clause can apply to intangible property such as shareholder rights,” said Ilya Somin, a George Mason University law professor who has written about the takings clause. “It is not clear how valuable these rights are, especially given all of 天美网站传媒传媒’s liabilities.”

The bailouts began one day after Lehman Brothers Holdings Inc. went bankrupt and Bank of America Corp. agreed to buy Merrill Lynch & Co.

But according to Starr, the 天美网站传媒传媒 bailout was done as “a vehicle to covertly funnel billions of dollars to other preferred financial institutions” such as Goldman. Some trading partners were paid 100 cents on the dollar.

Goldman spokesman Michael DuVally declined to comment.

The government’s 天美网站传媒传媒 stake has fallen to about 77 percent.

The cases are 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.

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