NU Online News Service, Feb. 2, 3:09 p.m.EST

Starr International and its Chairman and Managing DirectorMaurice “Hank” Greenberg, have amended a lawsuit against thefederal government to claim that the terms of government aid to AIGstarting in 2008 “amounted to an attempt to 'steal thebusiness.'”

The amended lawsuit was filed Jan. 31 in the U.S. Court ofClaims, based inWashington.

The government has until March 1 to file a motion seekingdismissal of the case.

The lawsuit was originally filed Nov. 21. It seeks $25 billion from the federalgovernment for Starr, Greenberg, “and on behalf of all otherssimilarly situated, and derivatively on behalf of AIG.

On the same date, Starr also sued the Federal Reserve Bank ofNewYork, which provided the initial $85 billion in aid to AIG inSeptember 2008. That suit is pending inFederal District Courtforthe Southern District of New York inManhattan.

That suit argues that other troubled banks were offered betterterms than AIG in a “backdoor bailout.”

It charged that the Fed's government aid, starting Sept. 16,2008, in return for 79.9 percent of AIG's stock is anunconstitutional “taking” of property.

The amended complaint filed by Starr on behalf of Greenberg andothers says that during the financial crisis, the government in anumber of cases provided guarantees and access to federalfunds.

The complaint says that “AIG was a particularly good candidatefor such liquidity support because its assets substantiallyexceeded its liabilities; its problem was not one of solvency butof temporary liquidity.”

In addition, the complaint says, “a bankruptcy filing by AIGwould have severely worsened the finances of many other financialinstitutions.”

The complaint also alleges that “rather than providing AIG withthe liquidity support offered to comparable firms,” the governmentin September 2008 “took control of AIG away from its shareholdersby becoming a controlling lender and a controllingshareholder.”

The complaint goes on, “As one banker hired to represent theFederal Reserve Bank ofNew York's interests during these eventsremarked, the basic terms of these transactions amounted to anattempt to 'steal the business.'”

The revised complaint adds, “This was the first in a series ofsteps that, after taking into account subsequent governmentacquisitions, eventually resulted in the government acquiring over90 percent of such shareholders' equity, of which 562,868,096shares of AIG common stock were taken without justcompensation.”

The case is being heard by U.S. Claims Judge Thomas Wheeler.

Wednesday, he ordered that AIG be notified that it was added asa “nominal” defendant in the case, meaning the company would bebound by any judgment.

At its peak, the government provided $182 billion through TARPand other bailout programs, and provided AIG with another $25billion at one point through a special, secret Fed program notdisclosed until Bloomberg publications won a court order requiringthe Fed to disclose the special lending program.

In 2009, William K. Sjostrom, Jr.—now a Professor of Law at theJames E. Rogers College of Law at the University ofArizona—published in the Washington & Lee Law Review ananalysis of AIG's problems.

By Sjostrom's calculations, AIG's fall stemmed a staggering$32.4 billion in losses racked up by AIG's Financial Products unit.These losses were almost entirely from AIGFP's credit default swapactivities.

According to Sjostrom's paper, on February 2008, AIG had $1trillion in assets and had announced earnings of $6.2 billion($2.39 per share), but by September 2016, just a few months later,it had fallen into the unhappy arms of the Federal Reserve Bank ofNew York.