Starr, Greenberg: Bernanke must respond to questionsNews added by LifeHealthPro on September 5, 2013
By Arthur D. Postal
Lawyers for Maurice “Hank” Greenberg, former chairman and CEO of American International Group, argue in a new court filing that they be allowed to question Federal Reserve Board Chairman Ben Bernanke about his role in the government’s takeover of AIG in September 2008.
The deposition, filed Friday, was in response to a move by the Department of Justice seeking to bar Greenberg and lawyers for the company he controls, Starr, from deposing Bernanke.
Judge Thomas Wheeler of the U.S. Court of Claims had approved the request of Greenberg and Starr to depose Bernanke, and said he would attend the meeting. However, it was indefinitely delayed when the government filed a request for a “writ of mandamus,” an order that would have barred the filing with the Court of Claims Appeals Court.
“Because Wheeler’s decision was a sound exercise of his discretion, and because the government does not account for the need for this testimony or the demanding standard of review that applies in this context, the petition should be denied,” Greenberg’s lawyers at Boies, Schiller & Flexner said in a court filing late Friday.
The proceedings are rare.
Greenberg, former chairman and CEO of AIG, through Starr International, a company he controls that formerly owned more than 13 percent of AIG stock, seeks $25 billion from the U.S. government. He alleges that the federal government’s methodology in aiding a troubled AIG amounted to an attempt to “steal the business.”
The issue as a whole stems from the government acquisition of 79.9 percent of the stock of AIG, with the approval of its board, in return for $85 billion in cash in September 2008. The Fed later provided additional aid to AIG through additional cash and creation of facilities in exchange for mortgage-backed securities (MBS) either directly held by AIG or exchanged by holders of MBS guaranteed by credit default swaps issued by AIG.
The federal government later paid the Federal Reserve for the stock, and then sold off its AIG holdings by September 2012 through a series of initial public offerings. The Fed has also sold off the securities held in the facilities it created.
The DOJ said in its appeal of the Wheeler order that, “It is axiomatic that high-ranking federal officials — such as the chairman of the Board of Governors, a Cabinet-level officer of the United States — should not be compelled to provide testimony at the behest of civil litigants absent extraordinary circumstances.”
In asking the appeals court to reject the government’s effort to bar the deposition, lawyers for Greenberg said the government “wrongly suggests that plaintiff seeks ‘to probe the basis for his vote in favor of the transaction (which was a foregone conclusion).’”
Instead, the Greenberg memo said, “What Plaintiff seeks to probe is Bernanke’s knowledge of the material issues of this case as reflected in his own statements delivered not in formal administrative findings, but rather in contemporaneous communications and a range of subsequent public settings from Congress to the PBS NewsHour with Jim Lehrer.”
“Because Wheeler’s decision was a sound exercise of his discretion, and because the government does not account for the need for this testimony or the demanding standard of review that applies in this context, the petition should be denied,” lawyers for Greenberg said.
An industry lawyer familiar with the proceedings said the standard the Appeals Court must meet in granting the government’s request is that Wheeler “abused his discretion” in ordering Bernanke to submit to the deposition. “That is a pretty high standard for them to meet, a higher standard than they would need to reach on an ordinary appeal.”
Originally published on LifeHealthPro.com
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