AIG 2012 Annual Report Download - page 311

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Starr International Litigation
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On November 21, 2011, Starr International Company, Inc. (SICO) filed a complaint against the United States in the
United States Court of Federal Claims (the Court of Federal Claims), bringing claims, both individually and on behalf
of all others similarly situated and derivatively on behalf of AIG (the SICO Treasury Action). The complaint challenges
the government’s assistance of AIG, pursuant to which AIG entered into the FRBNY Credit Facility and the United
States received an approximately 80 percent ownership in AIG. The complaint alleges that the interest rate imposed
on AIG and the appropriation of approximately 80 percent of AIG’s equity was discriminatory, unprecedented, and
inconsistent with liquidity assistance offered by the government to other comparable firms at the time and violated the
Equal Protection, Due Process, and Takings Clauses of the U.S. Constitution.
On November 21, 2011, SICO also filed a second complaint in the Southern District of New York against the FRBNY
bringing claims, both individually and on behalf of all others similarly situated and derivatively on behalf of AIG (the
SICO New York Action). This complaint also challenges the government’s assistance of AIG, pursuant to which AIG
entered into the FRBNY Credit Facility and the United States received an approximately 80 percent ownership in
AIG. The complaint alleges that the FRBNY owed fiduciary duties to AIG as our controlling shareholder, and that the
FRBNY breached these fiduciary duties by ‘‘divert[ing] the rights and assets of AIG and its shareholders to itself and
favored third parties’’ through transactions involving ML III, an entity controlled by the FRBNY, and by ‘‘participating
in, and causing AIG’s officers and directors to participate in, the evasion of AIG’s existing Common Stock
shareholders’ right to approve the massive issuance of the new Common Shares required to complete the
government’s taking of a nearly 80 percent interest in the Common Stock of AIG.’’ SICO also alleges that the
‘‘FRBNY has asserted that in exercising its control over, and acting on behalf of, AIG it did not act in an official,
governmental capacity or at the direction of the United States,’’ but that ‘‘[t]o the extent the proof at or prior to trial
shows that the FRBNY did in fact act in a governmental capacity, or at the direction of the United States, the
improper conduct . . . constitutes the discriminatory takings of the property and property rights of AIG without due
process or just compensation.’’
On January 31, 2012 and February 1, 2012, amended complaints were filed in the Court of Federal Claims and the
Southern District of New York, respectively.
In rulings dated July 2, 2012, and September 17, 2012, the Court of Federal Claims largely denied the United States’
motion to dismiss in the SICO Treasury Action. Discovery is proceeding. On December 3, 2012, SICO moved for
class certification.
On November 19, 2012, the Southern District of New York granted the FRBNY’s motion to dismiss the SICO New
York Action. On December 21, 2012, SICO filed a notice of appeal in the United States Court of Appeals for the
Second Circuit.
The United States has alleged, as an affirmative defense in its answer, that AIG is obligated to indemnify the FRBNY
and its representatives, including the Federal Reserve Board of Governors and the United States (as the FRBNY’s
principal), for any recovery in the SICO Treasury Action, and seeks a contingent offset or recoupment for the value
of net operating loss benefits the United States alleges that we received as a result of the government’s assistance.
The FRBNY has also requested indemnification under the FRBNY Credit Facility from AIG in connection with the
SICO New York Action and from ML III under the Master Investment and Credit Agreement and the Amended and
Restated Limited Liability Company Agreement of ML III.
In both of the actions commenced by SICO, the only claims naming AIG as a party (nominal defendant) are
derivative claims on behalf of AIG. On September 21, 2012, SICO made a pre-litigation demand on our Board
demanding that we pursue the derivative claims in both actions or allow SICO to pursue the claims on our behalf. On
January 9, 2013, our Board unanimously refused SICO’s demand in its entirety and on January 23, 2013, counsel for
the Board sent a letter to counsel for SICO describing the process by which our Board considered and refused
SICO’s demand and stating the reasons for our Board’s determination.
Other Litigation Related to AIGFP
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On September 30, 2009, Brookfield Asset Management, Inc. and Brysons International, Ltd. (together, Brookfield)
filed a complaint against AIG and AIGFP in the Southern District of New York. Brookfield seeks a declaration that a
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AIG 2012 Form 10-K294
ITEM 8 / NOTE 16. CONTINGENCIES, COMMITMENTS AND GUARANTEES