The board of American International Group has declined to join a lawsuit against the federal government over its $182 billion taxpayer-financed bailout, the company said Wednesday.
The decision follows a public uproar over the possibility that AIG would sue the same authorities that rescued it during the financial crisis. The board had been weighing whether to join a $25 billion lawsuit filed by its former chief executive, Maurice Greenberg, on behalf of shareholders, arguing that they lost tens of billions of dollars when the government attached onerous terms to the bailout.
The insurer's board met Wednesday, listening to presentations from Greenberg's lawyers, as well as from representatives of the Treasury Department and the Federal Reserve Bank of New York, the defendants in the lawsuit. The government felt that the claims were frivolous, arguing that the company's alternative was bankruptcy.
After the meeting, which lasted all morning, the board voted to steer clear of the case.
Wednesday's decision ends more than a year of suspense over what AIG would do. Greenberg filed the case in late 2011 in both Washington and New York City, and has long pressured the company to join.
The board's vote deals a blow to Greenberg's case, which had already been dismissed in the New York court. That decision is under review by an appeals court, although the judge in the Washington court declined to dismiss the case.
AIG directors faced a difficult choice. Joining the case would have added to public outrage over the company's bailout, one of the biggest and most controversial of the crisis. Lawmakers in recent days have warned the company not to side with Greenberg, which would make it "the poster company for corporate ingratitude and chutzpah."
The meeting coincided with an aggressive advertising campaign by the company thanking taxpayers for rescuing it during the crisis. And it comes only weeks after the insurer fully repaid its bailout, generating about $22 billion in profit for the public.
And yet AIG's board, most of whom joined after the bailout, owe a duty to shareholders to consider the lawsuit. Greenberg could challenge the decision to abstain as failing to fulfill legal obligations to investors.
Still, corporate law affords the board leeway in deciding whether to pursue the case.