AIG Wants to Stop Former CEO Greenberg From Naming It as a Defendant in Derivatives Lawsuit Against the US

American International Group is asking a federal judge to prevent Maurice Greenberg, its former chief executive, from suing the federal government on its behalf. The insurer had already decided it wasn’t going to file a lawsuit against the federal government over its bailout that took place during the economic crisis.

Greenberg, who has filed a $25 billion securities lawsuit against the US, is pursuing derivative claims for the company. He claims that the bailout’s “onerous” terms cost the insurer’s investors billions.

While AIG isn’t trying to stop Greenberg from suing on his behalf or for other shareholders, the insurance giant has made it clear that suing the government over the rescue isn’t where it wants to focus its energy and resources. In its filing, AIG notes that according to Delaware Law, Greenberg, through Starr Investment, cannot take over the right of the AIG board to make the call on whether/not to sue.

All of AIG’s directors were unanimous in their decision not to have AIG join Greenberg’s securities lawsuit. He, however, claims that they succumbed to government pressure.

In its filing, AIG argues that its decision not to sue makes sense, seeing as the board believes that securities claims that Starr is making on its behalf may not be ‘slam dunk… winner,’ contrary to his claims. The insurer says that its own counsel thinks that chances of the derivatives lawsuit proving to be a success are “low.” They also believe that such litigation would harm AIG’s image, brand, and relationships with regulators, shareholders, customers, and elected officials while negatively impacting its attempts to rebuilding itself and pay back everything it owes the government.

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Pension Plans’ Shareholder Derivative Claims Against UBS is Reinstated by 1st Circuit Appeals Court

The U.S. Court of Appeals for the First Circuit has reinstated the shareholder derivative claims filed by two Puerto Rican pension funds against UBS Financial Services Inc. (UBS) Judge Kermit Lepez said that following de novo review—a district court had dismissed the case on the grounds that a failure to properly plead demand futility was subject to such an examination—it seemed to him that the plaintiffs’ allegations sufficiently show reasonable doubt about six fund directors’ ability to assess the former’s demand to bring this action with the independence and disinterest mandated by Puerto Rican law.

The two pension funds are the owners of shares in closed-end funds that made investments, which were not successful, through UBS entities. Their investment adviser and fund administrator is UBS Trust, which is a UBS Financial affiliate.

According to the court, UBS Financial, which has been Puerto Rico’s Employee Retirement System (ERS) financial adviser for more than five years, underwrote $2.9B of ERS-issued bonds. Meantime, the UBS Trust bought approximately $1.5B of the ERS bonds and then sold them to funds. At issue is about $757M in bonds that the two Puerto Rican funds purchased.

Unfortunately, within a year of when they were issued, the bonds value dropped 10%, lowering the funds’ value. They then went on to file their lawsuit against UBS Trust, UBS Financial, and the director of the funds claiming that the defendants took part in a manipulative trading scam to make it look as if there was market interest when the point was to raise prices so that other investors would buy.

The defendants sought to have the case dismissed, claiming that the directors of the funds did not get a presuit demand first while the plaintiffs neglected to note why there was no point to submitting this type of demand. The lower court granted their motion. Now, however, the appeals court says that the securities case can proceed.

If you, your family, friends, neighbors or associates have a shareholder Derivative Claim, please contact our law firm at (203) 542-7275 for a confidential, no obligation consultation.