Articles Tagged with AIG

Ex-NY Governors Pataki and Cuomo Tell AG Schneiderman to Ease Off On Former AIG Head

Published on: May 18, 2013 | by Shepherd Smith Edwards & Kantas, LLP

In a joint op-ed, ex-New York governors George Pataki and Mario Cuomo are asking NY Attorney General Eric Schneiderman to reconsider his efforts to seek remedies, including injunctive relief, against Maurice “Hank Greenberg,” the former American International Group (AIG) chief. The former governors believe that not only will such a pursuit waste “time and money,” but also, they say that it is “morally wrong.”

It was just last month that Schneiderman told the New York State Court of Appeals that the state was dropping its claim seeking possibly billion of dollars in financial fraud damages in an eight-year-old case against Greenberg and another ex-executive but that he would continue to hold the defendants responsible by pursuing other remedies, including bans on serving as a public company director/officer and involvement in the securities industry. Greenberg, who ran AIG for almost 40 years, resigned in 2005 in the wake of an investigation into the insurer’s accounting practices. He denies wrongdoing.

Last year, a federal judge approved a $115 million settlement with shareholders over the accounting issues that were at the heart of the state’s lawsuit. (Meantime, investors have also filed related securities fraud against Greenberg and other former AIG executives.) However, despite dropping the claim for fraud damages, Schneiderman has remained adamant about proceeding with a trial against Greenberg. He believes that individuals who commit fraud must be held publicly accountable. Replying to the former NY governors, a spokesperson for the attorney general said as much, all the while noting Schneiderman’s respect for the two men and their “longstanding ties” to Greenberg.

AIG Wants to Stop Former CEO Greenberg From Naming It as a Defendant in Derivatives Lawsuit Against the US

Published on: April 13, 2013 | by Shepherd Smith Edwards & Kantas, LLP

American International Group is asking a federal judge to prevent Maurice Greenberg, its former chief executive, from suing the federal government on its behalf. The insurer had already decided it wasn’t going to file a lawsuit against the federal government over its bailout that took place during the economic crisis.

Greenberg, who has filed a $25 billion securities lawsuit against the US, is pursuing derivative claims for the company. He claims that the bailout’s “onerous” terms cost the insurer’s investors billions.

While AIG isn’t trying to stop Greenberg from suing on his behalf or for other shareholders, the insurance giant has made it clear that suing the government over the rescue isn’t where it wants to focus its energy and resources. In its filing, AIG notes that according to Delaware Law, Greenberg, through Starr Investment, cannot take over the right of the AIG board to make the call on whether/not to sue.

US Government Sells $18B of AIG Stock and Turns a $12.4B Profit

Published on: September 11, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The United States Treasury Department has sold $18 billion of American International Group Inc. (AIG) stock in a public offering. The sale cut the government ‘s stake in the insurance company to approximately 21.5% while making it a $12.4B profit on the bailouts that occurred during the economic crisis. This could be largest secondary offering in our nation’s history. AIG’s shares were sold at $32.50 each.

Meantime, AIG repurchased $5B of its shares with the remaining going to the broader public. In a securities filing, the insurance company said that it intends to use $3B of short-term securities and cash and $2B in proceeds from its sale of its stake in AIA Group to repurchase its stock.

Now, underwriters have 30 days to purchase another $2.7B of AIG shares. The deal’s underwriters include Citigroup Inc. (C), Deutsche Bank, AG (DB), Credit Suisse (CS), Goldman Sachs Group Inc. (GS), Wells Fargo & Co. (WFC), JPMorgan (JPM), Royal Bank of Canada’s (RY) RBC Capital Markets division, Bank of America Corp’s (BAC) Merrill Lynch division (MER), Morgan Stanley (MS), and Barclays PLC (BCS).

This is the government’s largest sell-down of AIG shares since bailing out the insurer. It had even pledged up to $182.3B to bolster AIG in the wake of growing subprime losses at one point. In return, the government acquired a close to 80% stake in AIG.

To date, the government, which used taxpayer funds to keep some companies afloat during the economic crisis, has gotten back $342 billion of the $411 billion that it through Troubled Asset Relief Program. That said, over 300 small banks that were given funding through TARP still need to pay back taxpayers.

In May, the GAO estimated that taxpayers might profit by $15.1 billion on the AIG bailout. Overallotment, if exercised, will allow the government to arrive at that amount. (The government has been reducing its stake in AIG since early last year. With the overallotment option of the stock sale, the government’s stake will go from 53% to 15.9%.)

According to Reuters, with the Treasury’s ownership stake in it dropping under 50%, because AIG is the owner of a small bank the Federal Reserve will begin regulating it as a savings and loan holding company. This means that AIG will have to be in compliance with the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act’s new rules, such as the Volcker law, which places a limit on a large financial firm’s being able to have stakes in hedge funds and private equity firms or trade for their own account.

The government’s bailout of AIG after Lehman Brothers filed for bankruptcy about four years ago had totaled $182 billion. Now, Chief Executive Robert Benmosche is saying that the financial rescues, paid back at a profit, have left the insurer positioned for success. The government has also been paid back in huge part the bailout loans it gave to other large financial institutions. However, it still is owed much from its rescues of Chrysler and General Motors and the billions of dollars it used to keep Fannie Mae and Freddie Mac afloat.

Treasury sells big chunk of AIG stock at a profit, Reuters, September 11, 2012

Treasury Sells More AIG Shares: $20.7B Total Cuts Stake To 15.9%, Forbes, September 11, 2012
U.S. Plans $18 Billion Sale of AIG Stock, The Wall Street Journal, September 10, 2012

Ex-AIG CEO Sues Government For $25B Over 2008 Takeover of Insurance Giant

Published on: November 21, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Maurice R. “Hank” Greenberg, the former CEO of American International Group Inc., is suing the federal government for taking over the insurance giant in 2008. Greenberg is seeking $25 billion.

Greenberg’s Star International, which was AIG’s largest stakeholder when the government rescue took place, filed his lawsuit in the U.S. Court of Federal Claims. He contends that the government bailout and takeover of AIG was unconstitutional. The amount of damages he is seeking was arrived at from the value of the 80% AIG stake that the government got for its $182 billion bailout.

The money let AIG pay off Goldman Sachs and other counterparties, as well as compensate its executives with $182 million in bonuses. The public, however, was outraged when AIG executives were still awarded excessive compensation packages—especially considering that AIG lost $61.7 during the fourth quarter of 2008 alone. The insurer had to sell off some assets to repay the government, and Greenberg’s stake in the company suffered as a result.

Now, he is claiming that the federal government used AIG to get money to the insurance company’s trading partners. He contends that by obtaining an almost 80% stake in the insurer for bailing it out, the government took valuable property from AIG shareholders and that this violates the Fifth Amendment, which prevents the taking of private property for public use without appropriate compensation.

Greenberg’s opposition to the government bailout comes as no surprise. Earlier this year, he wrote in the Wall Street Journal that the government overstepped when it took preferred stock with the option to change these into common stock. Such transactions were performed without the approval of shareholders, which he believes violates Delaware law. AIG was incorporated there.

Last year, the Treasury Department upped its stake in AIG to 92.1% when it turned preferred shares into common shares. However, it sold some of its shares to investors in May so its ownership percentage in AIG is now at 77%. It is still trying to recover over $41 billion from the sale of the rest of its stake.

AIG Bailout
The government seized control of AIG not long after it became clear that Lehman Brothers Inc. was going to have to shut down. Per the terms of the agreement, the Fed said it would lend AIG $85 billion, and the government was given the substantial equity stake. The takeover came on the heels of the government also seized Freddie Mac and Freddie Mae as they stood on the brink of collapse. Merrill Lynch & Co, which was also in trouble, agreed to let Bank of America Corp. buy it.

U.S. to Take Over AIG in $85 Billion Bailout; Central Banks Inject Cash as Credit Dries Up, The Wall Street Journal, September 16, 2008