US sued for $25bn over AIG bailout

Stephen Foley

Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.

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Hank Greenberg, the octogenarian insurance industry executive, is suing the US government for $25bn (£16bn), claiming the part-nationalisation of AIG during 2008's financial panic was unconstitutional.

AIG was prevented from going bust by the injection of $180bn of taxpayer money, in return for which the US government took an 80 per cent stake in the insurer.

Mr Greenberg used to run AIG before being ousted in an accounting scandal in 2005, and his investment firm Starr International was a major shareholder in 2008. Starr's claim for $25bn is based on its calculation of the value of the government's stake this January. It says the Fifth Amendment of the US Constitution bars the taking of private property for public use without just compensation.

"The government's actions were ostensibly designed to protect the United States economy and rescue the country's financial system," the firm said in a lawsuit filed yesterday. The government, it said, "is not empowered to trample shareholder and property rights even in the midst of a financial emergency".

AIG was brought to the point of collapse during the crisis because of insurance it had written on subprime mortgage derivatives.

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