Former American International Group Inc. Chief Executive Officer Edward Liddy testified he chose not to buck government overseers who selected him to run the bailed- out insurer.
Developing trust with regulators was for the “benefit of AIG,” he told the attorney for Maurice “Hank” Greenberg’s Starr International Co. in the trial over claims the bailout cheated the insurer’s shareholders out of at least $25 billion.Because he was from Goldman, and there to help the government;
Liddy, a former CEO of Allstate Corp., was serving on Goldman Sachs Group Inc.’s board when, according to his testimony, he was recruited to the AIG post by Christopher Cole, at the time the head of Goldman Sachs’s investment banking unit.
Liddy testified that he considered Cole an emissary of then-Treasury Secretary Henry Paulson, a former Goldman Sachs CEO, who called him after he agreed to take the post.
Another former Goldman Sachs executive, Ken Wilson, who was serving as an adviser to Paulson, also urged him to take the position, Liddy told the court.Pardon the suspicion that Goldman might have been using AIG's assets in a less than disinterested fashion.
Starr [Int'l, the major shareholder of AIG] contends the government wanted control of AIG’s assets to facilitate a “backdoor bailout” of the New York- based insurer’s investment bank trading partners, including Goldman Sachs, and that it manipulated the company’s governance to avoid a shareholder vote on the rescue package.A vote the government would have lost;
When asked [by lawyer Boies] about some of the details of the loan, such as a provision for a trust to hold the government’s stock in AIG and a requirement for equity, [ex-CEO] Liddy said “the mechanics of this were very complicated” and he relied on the advice of lawyers.
....Starr’s complaint alleges that the government shifted the kind of equity it demanded to preferred shares when it realized that a warrant would be subject to shareholder approval it could not win.So, the bailout team decided to get around the shareholders by only dealing with a compliant Board they'd manipulated.