Maurice Greenberg's $25 billion lawsuit against the U.S. government over the bailout of American International Group Inc. moved a step closer to trial this week, as a federal judge denied the government's motion for summary judgment. That trial, set to begin Sept. 29, would feature testimony from former top government officials who led the response to the 2008 financial crisis, as well as some of Wall Street's most prominent banking lawyers.In a three-page ruling Monday, U.S. Court of Federal Claims Judge Thomas Wheeler yet again refused to knock out the suit brought by lawyers at Boies, Schiller & Flexner and Skadden, Arps, Slate, Meagher & Flom on behalf of Greenberg's Starr International Co. Greenberg, a former AIG chairman, claims that the government's acquisition of an 80 percent stake in AIG during the financial crisis amounted to an illegal taking.
As we previously reported, Starr claims the government used that controlling stake to covertly funnel billions of dollars to other preferred financial institutions. In particular, Starr claims the government caused AIG to make full payments to credit default swap counterparties without negotiating discounts-a move Starr claims cost AIG more than $60 billion. The government's lawyers countered that AIG and its directors voluntarily agreed to the government's terms. They also claimed that there's no evidence that AIG shareholders lost money.
Wheeler, however, held that a trial is necessary because there's still a dispute about the underlying facts, and expert testimony is needed to help settle complex financial and economic issues.
A spokeswoman for Boies Schiller said the decision speaks for itself and declined to comment further. A spokeswoman for the U.S. Department of Justice's Civil Division, which is representing the government, declined to comment.
As we've previously reported, Greenberg struck out in a similar lawsuit claiming that the Federal Reserve Bank of New York breached its fiduciary duties to AIG shareholders under Delaware law during the bailout. In that case U.S. District Judge Paul Engelmayer in Manhattan found in 2012 that because of the uniquely federal interests at stake in stabilizing the national economy, state fiduciary law did not apply to the FRBNY's rescue activities.
Greenberg has had better luck at the Court of Federal Claims. Wheeler allowed the illegal takings claim to survive a government motion to dismiss in June 2013. The judge also permitted Greenberg's lawyers to depose one of the architects of the AIG bailout, former Federal Reserve Chairman Ben Bernanke, in spite of government objections.
According to a list of potential witnesses filed by Boies Schiller and Skadden earlier this month, Bernanke won't be the only notable name called to testify. The list also includes former Treasury secretaries Henry Paulson and Timothy Geithner and former AIG chief Edward Liddy. Am Law 100 partners on the list include Sullivan & Cromwell's H. Rodgin Cohen, who represented AIG's board; Eric Dinallo, the former superintendent of the New York State Insurance Department, who is now at Debevoise & Plimpton; and Davis Polk & Wardwell's John Brandow and Marshall Huebner, who advised the U.S. Department of the Treasury.
Others listed as possible witnesses include Richard Beattie and Michael Nathan of Simpson Thacher & Bartlett; Joshua Feltman, Edward Herlihy, Richard Kim and Lawrence Makow of Wachtell, Lipton, Rosen & Katz; and Michael Wiseman of Sullivan & Cromwell.