AIG Inc's counsel informed its board that a bailout lawsuit filed by former chief executive Hank Greenberg against the U.S. government has a low likelihood of success, as the insurer weighed whether to join the suit, according to a court filing.
Greenberg's case, brought on behalf of his company Starr International Co, accused the U.S. government and the New York Federal Reserve of wasting more than $60 billion of AIG and taxpayer funds in a "backdoor bailout" that let "favored" trading partners, such as Goldman Sachs Group Inc , be repaid in full and freed from legal liability.
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Insurer AIG weighed whether to join the lawsuit filed by Greenberg and his company, which owned 12 percent of AIG before its $182 billion rescue that started in 2008.
However, facing anger from Congress and the American people, AIG said earlier this month that it would not sue the U.S. government over the terms of the bailout.
In a letter filed with a New York court on Wednesday, AIG lawyer Paul Curnin said he put Starr's likelihood of success "at no more than 20 percent."
Curnin said the available evidence, including more than 3000 pages of exhibits, did not support Starr's assertion that the U.S. government or the New York Fed coerced AIG's board into accepting the bailout loans in September 2008.
The court filing showed that before deciding not to join Greenberg's lawsuit the AIG board discussed issues such as potential damage to the company's brand and image.
The Treasury sold the last of AIG's stake in mid-December 2012. The government has said it earned a return of $22.7 billion on the rescue.
The cases are Starr International Co v. Federal Reserve Bank of New York, U.S. District Court, Southern District of New York, No. 11-08422; and Starr International Co v. U.S., U.S. Court of Federal Claims, No. 11-00779.
(Reporting by Sakthi Prasad in Bangalore)