AIG Board Won’t Sue Over Terms Of Rescue

American International Group Inc. decided Wednesday to pass on a shareholder lawsuit that accuses the U.S. government of unfairly burdening the company during its financial-crisis rescue, in a move that could snuff out a brewing controversy for the insurer.

The insurer’s directors unanimously rejected any participation in the suit, partly to avoid reputational harm that they feared could result from signing on, according to a person familiar with the company.

“The Board’s decision today was about continuing to move this company forward, not backward,” said Chief Executive Robert Benmosche in a memo to employees.

The suit is being pursued by AIG’s former leader, 87-year-old Maurice R. “Hank” Greenberg, through a company he now leads that once was a large AIG shareholder, Starr International Co. The suit contends the U.S. government extracted too-onerous terms in its rescue package for AIG, and seeks about $25 billion from the government. A federal claims court in Washington ruled in July that the case could proceed, after the U.S. government sought to dismiss it.

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