The New York Times scored a major scoop Monday night when they broke the news that AIG was thinking of joining a lawsuit against the U.S. government. Here are some of the details from its story published Jan. 7 at 10:30 p.m.:
Fresh from paying back a $182 billion bailout, the American International Group has been running a nationwide advertising campaign with the tagline “Thank you America.”
Behind the scenes, the restored insurance company is weighing whether to tell the government agencies that rescued it during the financial crisis: thanks, but you cheated our shareholders.
The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal’s high interest rates and the funneling of billions to the insurer’s Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for “public use, without just compensation.”
Maurice R. Greenberg, A.I.G.’s former chief executive, who remains a major investor in the company, filed the lawsuit in 2011 on behalf of fellow shareholders. He has since urged A.I.G. to join the case, a move that could nudge the government into settlement talks.
The choice is not a simple one for the insurer. Its board members, most of whom joined after the bailout, owe a duty to shareholders to consider the lawsuit. If the board does not give careful consideration to the case, Mr. Greenberg could challenge its decision to abstain.
Having been on the receiving end of many phone calls about matching and advancing scoops such as this, I know it wasn’t a fun evening for many insurance reporters. But let’s take a look at some of their work advancing the story.
The Wall Street Journal opted for a straight, short match of the story, giving credit to the New York Times. They did have the detail high up that the suit was filed on behalf of Starr International, controlled by Greenberg. Here are a couple of paragraphs:
In July, a federal judge ruled that Mr. Greenberg’s lawsuit, which accuses the U.S. government of engineering an unconstitutional bailout of the insurer, could proceed. The U.S. Court of Federal Claims ruling allowed most of the case brought on behalf of Starr to proceed, while dismissing some claims.
Starr sued the government in 2011, saying its taking of a roughly 80% AIG stake and extending tens of billions of dollars in credit with an onerous initial interest rate of roughly 15% deprived shareholders of their due process and equal protection rights.
Bloomberg took a different approach in their story, advancing it by taking the angle that AIG joining the suit would be difficult and quoting a former bailout executive.
American International Group Inc. (AIG), the insurer that’s weighing whether to join a shareholder suit alleging its 2008 bailout was unconstitutional, would face tough odds in court, a former government watchdog said.
AIG’s board is scheduled to meet tomorrow to review whether it should join a case brought in 2011 by former Chief Executive Officer Maurice “Hank” Greenberg. The ex-CEO said that the rescue cheated shareholders by diluting their stake in the company. The insurer needed help after it was unable to raise money in equity and bond markets to pay clients who had bought protection against losses on mortgage-related securities.
“The idea that AIG would have been better off by going bankrupt, for the shareholders is a very, very hard thing to sell, I think, to a judge,” Neil Barofsky, the former inspector general of the U.S. Troubled Asset Relief Program said today on Bloomberg Television. Greenberg has “one of the best lawyers on the planet,” he said, “but I just don’t see how you get past the fact the board voted” to accept U.S. aid.
The lawsuit presents both legal and public-relations challenges for a company that repaid the remainder of a $182.3 billion bailout last year. The New York-based insurer last week began an advertising campaign to thank taxpayers for their support and highlight that the U.S. made a profit on the rescue.
Reuters did a round up of what political leaders were saying at the top of their story:
A leading congressional Democrat called criticism of the deal’s terms “utterly ridiculous,” and former New York Attorney General Eliot Spitzer – who probed AIG when he was in office – called the prospect of a suit “insulting to the public.”
The White House declined to comment on the potential for a lawsuit but defended the bailout.
Meanwhile, newly elected Senator Elizabeth Warren, feared by Wall Street as a potential thorn in its side on the Senate Banking Committee, called the suit talk “outrageous” and said the company should not “bite the hand that fed them for helping them out in a crisis.”
No matter the angle, it was a good win for the Times and promises to yield coverage after the board meets. Stay tuned on this one.
