Somin on Greenberg AIG Lawsuit
Professor Ilya Somin was quoted by Reuters in an article discussing the recent lawsuit by a company run by former American International Group Inc. (AIG) chief executive Maurice (Hank) Greenberg. The lawsuit is an effort to force the government to pay $25 billion to AIG shareholders who lost money in falling stock prices subsequent to the government's 2008 bailout of the troubled company. At issue is the government's taking of a nearly 80 percent AIG stake without a shareholder vote, which the suit claims violated shareholders' rights to due process and equal protection, as well as a Fifth Amendment ban against taking private property for public use without just compensation known as the "takings clause."
"Courts have recognized that the takings clause can apply to intangible property such as shareholder rights," said Somin in the article. "It's not clear how valuable these rights are, especially given all of AIG's liabilities."
UPDATE 5-Greenberg sues U.S. for $25 bln over AIG takeover, Reuters, November 21, 2011. By Jonathan Stempel.
"'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."