Former American International Group chief Maurice "Hank" Greenberg sued the US government for $25 billion Monday over the takeover of AIG at the height of the financial crisis in 2008.
In a class action suit, Greenberg alleged that AIG shareholders lost most of their investments when the government unnecessarily took over AIG rather than just aiding it financially for what the lawsuit said was a "temporary liquidity" problem.
The lawsuit by Greenberg's Starr International Company charged the US discriminated against AIG and its shareholders, because it had given liquidity support to other large financial institutions rather than taking them over at the time.
"The government's taking of control over AIG and of AIG equity was deliberately disparate and discriminatory to the government's treatment of others similarly situated," said the suit.
"By deliberately and systematically treating the common stock shareholders differently from others similarly situated without a rational basis for the difference in treatment, the government also acted in violation of the equal protection rights of AIG common shareholders," it said.
Filed in the US Federal Claims Court in Washington, DC, the suit said the rescue, which involved some $140 billion in investment, loans and guarantees from the US Treasury and the Federal Reserve, unnecessarily wiped out 80 percent of the value of investors' shares in AIG.
It said the Treasury and Federal Reserve violated shareholders' fundamental property rights under the US Constitution.
It asked for damages of not less than $25 billion, equal to the value of the shares the government received in AIG, based on the $45.24 share price on January 14, 2011.
The Federal Reserve stepped in to rescue AIG on September 16, 2008, after worries about the company's finances sent the share price to a low of $1.25, from $56 at the beginning of the year.
The Treasury subsequently assumed control and currently holds a 77 percent stake, having put about $68 billion into the company.
According to the non-partisan website Pro Publica, after various repayments, the taxpayer-funded bailout has cost the government about $50 billion so far.
Treasury Assistant Secretary Tim Massad rejected the charges in the suit.
"It is important to remember that the government provided assistance to AIG -- and stopped it from collapsing -- in order to prevent a meltdown of the entire global financial system," he said in a statement.
"Our actions were necessary, legal, and constitutional. We are reviewing the lawsuit and expect to defend our actions vigorously."
AIG declined to comment on the suit.
Greenberg ran AIG for nearly four decades, building it into the world's largest insurer with a powerful global network before he was forced out as chief executive and chairman in 2005, when the company was hit with an investigation into accounting fraud.
AIG shares were down 4.3 percent to $20.95 in midday trade Monday.© ANP/AFP