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View Diary: Sen. Elizabeth Warren gives thumbs down to AIG's possible suing of taxpayers for bailing it out (125 comments)

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  •  Yes and no: (8+ / 0-)

    The shareholders sued the Fed on the ground that it had "taken over" the company and failed to do a good job for the shareholders:

    A federal judge in Manhattan has dismissed a $25 billion lawsuit filed by Starr International, an insurance company run by former American International Group CEO Maurice "Hank" Greenberg, against the Federal Reserve Bank of New York over its 2008 bailout of AIG.

    Southern District Judge Paul Engelmayer (See Profile) yesterday rejected Starr's arguments that the bailout was an illegal takeover of multinational insurance company AIG and a "backdoor bailout" for other financial firms that did business with it.

    Engelmayer further ruled that Delaware law could not apply to the Federal Reserve Bank because the bank is a federal instrumentality "entrusted with responsibility for maintaining the stability of the financial system" with "specific powers to be deployed when the economy is in difficulty."

    Starr's suit also alleged the bailout violated the takings, due process and equal protection clauses of the U.S. Constitution, though it abandoned those claims in the New York lawsuit and is pursuing them in a separate suit in the Court of Federal Claims in Washington, D.C. That suit, which is in the discovery stage, also seeks $25 billion.

    So what's left is, an action on behalf of the corporation in the Court of Claims on the ground of a "taking".   However, shareholders normally can't sue on behalf of the corporation: that's the management's job, and if the board of directors decides the suit is not in the corporate interest, it ends there.

    One piece of free advice to the GOP: Drop the culture wars, explicitly.

    by Inland on Tue Jan 08, 2013 at 01:25:09 PM PST

    [ Parent ]

    •  Sorta. (1+ / 0-)
      Recommended by:

      There's a strong presumption that decisions by directors that are unaffected by conflict of interest are non-actionable by shareholders (this is the "business judgment rule").

      But it's a presumption, not a conclusion, and as such can be overcome: a truly terrible decision that prejudices the interests of the shareholders can result in liability for the directors, even if they "decide the suit is not in the corporate interest."

    •  I was thinking about a shareholders derivative (0+ / 0-)

      action, and I think it's fair to say that unless the board decides the suit is in the corporation's best interest and takes it over, it won't go any further.   The shareholder/plaintiffs demand some sixteen million pages of documents from the USG: that's expensive stuff.

      One piece of free advice to the GOP: Drop the culture wars, explicitly.

      by Inland on Tue Jan 08, 2013 at 02:24:46 PM PST

      [ Parent ]

    •  Well, (2+ / 0-)
      Recommended by:
      judyms9, Laconic Lib

      shouldn't the shareholders loss be measured against what they would have had had the government done nothing?  That is, shareholders would have lost pretty much all their holdings, and now they are in a far better position than otherwise.

      This is assuming that the "taking" claim is not bullshit, which it totally is.  That one's not making it past the dismissal stage.  

      Maybe there ought to be a shareholder suit against Greenberg -- who really caused this mess.  That's got a lot more merit.  [I've no idea if it could ultimately win, of course, but he's far more responsible for the shareholder's losses, if any, than the government.)

    •  All we can be certain of (1+ / 0-)
      Recommended by:

      is that, had a capitalist CEO come in and run the company into the ground, no one would be getting sued just because he bailed after six months with a multi-million dollar golden parachute and more millions in solid gold stock options. Cause, Freedumbz!

      This is just lawyers thinking they can roll the government to steal a few million dollars from the taxpayers. Again.

      And why should we imagine they are wrong? It's certainly worked before.

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