AIG (AIG) Caught Between Rock and Hard Place as Suit Against U.S. Looms

January 8, 2013 2:03 PM EST
American International Group (NYSE: AIG) is lower on the session amid earlier reports that the insurance giant might be looking to sue its...savior?

Top brass at AIG will meet on Wednesday in an effort to determine whether or not to join a shareholder lawsuit against the constitutionality of its bailout in 2008.

The suit was filed in 2011 by former AIG CEO Maurice "Hank" Greenberg. It alleges that government action cheated shareholders by diluting their stake in the company. AIG took the bailout after efforts to tap debt and equity markets to pay shareholders who purchased protection against any losses tied to mortgage-backed securities failed.

Greenberg's Starr International may file a lawsuit against AIG if it doesn't join the case, record show. AiG might simply have a shareholder obligation to recover some funds for the company.

After receiving the bailout in 2008, AIG performed a 20-for-1 reverse split of its stock in order to buoy the price. Otherwise, bankruptcy would have been an option, leaving shareholders with a worthless stock.

Such is the PR battle AIG faces right now. The firm recently launched an ad campaign thanking taxpayers for the funds and noting that a profit was made on the investment. Those taxpayers might think twice should AIG turnaround and sue the only option it had at the time.

Shares are down 0.8 percent today.

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