The federal government doesn't want Federal Reserve Board Chairman Ben Bernanke to submit to questioning concerning a lawsuit filed in the aftermath of the 2008 federal rescue of American International Group.

The $25 billion dollar lawsuit deals was filed against the U.S. by former AIG CEO Maurice "Hank" Greenberg through Starr International, a company he now controls and that formerly owned more than 13 percent of AIG stock. Greenberg alleges the U.S. violated AIG shareholders' constitutional rights by the way it handled the bailout of AIG.

Judge Thomas Wheeler in late June cleared the case for trial, and then approved a motion by Greenberg lawyer David Boies at Boies, Schiller & Flexner, to depose Bernanke on Aug. 16 but the Department of Justice has stepped in with a filing in the U.S. Court of Appeals for the Federal Circuit to stop the deposition.

"Starr claims that the rescue terms offered by the Federal Reserve Bank of New York—and voluntarily accepted by AIG's board—did not reflect AIG's true worth and effected a taking without just compensation under the Fifth Amendment or an illegal exaction," says the DOJ in its filing, adding, "It is axiomatic that high-ranking federal officials—such as the chairman of the Board of Governors, a Cabinet-level officer of the United States—should not be compelled to provide testimony at the behest of civil litigants absent extraordinary circumstances."

According to the DOJ it is just as obvious that "litigants are not entitled to probe the mental processes of agency decision-makers."

The motion to the Appeals Court adds, "The trial court—which erroneously believed that it is a 'routine practice' in the Court of Federal Claims to compel the testimony of sitting high-level officials—likewise failed to articulate any theory under which personal testimony from Chairman Bernanke would be necessary or appropriate in this litigation."

The AIG board in January decided not to join the lawsuit, and did so in such a way that even in the event Starr-Greenberg won the lawsuit, AIG would not benefit. The company was dismissed as a derivative plaintiff.

But the way the AIG board's decision came about bothered Judge Wheeler, as he acknowledged in his June decision to allow the case to proceed, and later ruled to allow Greenberg's lawyers to depose Bernanke.

In his June decision, Wheeler acknowledged his pique that a lawyer for AIG had dared predict how he would ultimately rule as a contributing factor in the decision to clear the lawsuit for trial.

Wheeler also acknowledged in his decision that another contributing factor in his decision was an allegation that a Treasury official "made threatening statements to AIG's board members when the board was fulfilling its legal obligation to consider entry into this lawsuit."

He said media reports "contain inflammatory quotations from a number of public figures and elected officials who apparently lacked any understanding that AIG was required to consider entry into the lawsuit under the demand process of Delaware law.

"It is unfortunate that AIG's board members had to deal with this misplaced pressure and public outcry," Wheeler said.

ALSO READ: Judge Says Bernanke Should Testify in AIG Bailout Lawsuit

Judge Clears, Narrows Scope of $25B Greenberg Suit Against Government

Special Reports /

DOJ Looks to Stop Bernanke Testimony in AIG Case

Related Stories

Recommended For You