According to documents filed by AIG, AIG FP engaged in credit protection through credit default swaps and became a “central figure” in the 2008 financial crisis. The Federal Reserve lent AIG $85 billion as the insurer teetered on the brink of collapse.
The business faced legal action from senior former employees who alleged that AIG FP borrowed $194 million from them during the crisis, which was never repaid. A case in London AIG went the way on appeal A Connecticut lawsuit that AIG FP said it will continue to “vigorously defend” in 2020 is scheduled for next July.
According to an AIG FP disclosure document, a special committee was appointed in January 2022 as the business considered how to address “the entirety of its capital structure” in the face of legal costs and liabilities.
Former AIG employees claim they are owed millions
In a preliminary report dated Dec. 15, legal representatives for the 46 employees alleged that the “real motivation” for the bankruptcy filing was to avoid paying back former senior employees. The former employees’ claims are alleged to be worth between $550 million and $640 million.
AIG FP was asked to produce certain documents it claimed were privileged in a Connecticut court on Dec. 14, the same day it filed for its Chapter 11 bankruptcy, according to a statement filed by the employee plaintiffs.
“Notably, in the Connecticut action, AIG FP was ordered by Dec. 14 — the date of the Chapter 11 petition — to produce documents it sought to prevent privileged access to its alleged debt with AIG and the circumstances surrounding its failure to pay its employees,” the employee’s filing said. accused
“Instead of complying with that order, AIG FP has embarked on a blatant attempt to dress up this case as a de facto reorganization and essentially transfer the two-party dispute to this forum.”
when 2008 financial crisisAIG allegedly “borrowed hundreds of millions of dollars” from FP employees.
“By 2013, with the help of employee plaintiffs, AIG made repayments to the federal government with interest and returned to profitability,” the employee filing alleges.
“However, at this time, AIG FP was in a good position to reimburse its employees, which it never did.”
Debt status of ex-employees and restructuring “intent” dispute
The employee plaintiffs further alleged that Chapter 11 “could serve no remedial purpose” and that the debt owed to AIG was “disguised equity.”
The loan has “senior” status for employee claims, AIG FP said in its Dec. 14 release, with just $1 million in total funding for former employees under its plans.
“In light of this background, the employee plaintiffs will soon move to dismiss the Chapter 11 case as filed in bad faith and without proper restorative intent,” the employee filing said.
“Instead, if this case remains before the court and is not dismissed for bad faith, the Employee Plaintiffs submit that an independent trustee—following the transfer to Chapter 7 or the appointment of a Chapter 11 trustee—should be charged to trial. , among other things, AIG before this Chapter 11 filing. Pursue claims against AIG and other insiders for their role in the scheme for apparent substantial transfers and impairment of FP’s assets and, if appropriate,
The AIG unit has been in the liquidation process for more than 14 years and had assets worth $315 million on the petition date, according to its Dec. 14 disclosure statement. This includes $216 million in intra- and intercompany receivables and subsidiary investments, as well as a credit-linked note and $10 million in cash.
AIG for comment.