AIG decides to sue the US government

[cinyc]

Isn't this just wasting more bailout money for legal fees? Sit down, shut up, and enjoy the billions.

No.  AIG and the IRS have a dispute over how much taxes the company owed in prior years.  That's the type of thing that should get decided by the courts.  Believe it or not, the IRS isn't always right on these matters.

And the board has a duty to its minority shareholders to get any overpaid taxes back.   If Mr. X owns 80% of the company, and the company overpays Mr. X too much for something, Mr. X would be unjustly enriched and is effectively screwing the other 20% out of what should be their money.  That Mr. X is the government here is irrelevant.  The government bought this pile of crap instead of putting it into bankruptcy, as it should have.

[cinyc]

Isn't this just wasting more bailout money for legal fees? Sit down, shut up, and enjoy the billions.

No.  AIG and the IRS have a dispute over how much taxes the company owed in prior years.  That's the type of thing that should get decided by the courts.  Believe it or not, the IRS isn't always right on these matters.

And the board has a duty to its minority shareholders to get any overpaid taxes back.   If Mr. X owns 80% of the company, and the company overpays Mr. X too much for something, Mr. X would be unjustly enriched and is effectively screwing the other 20% out of what should be their money.  That Mr. X is the government here is irrelevant.  The government bought this pile of crap instead of putting it into bankruptcy, as it should have.

But had Mr. X not bought 80% of this company they would not have the money to sue for this possible overpayment. They need to take a seat until they start paying us back.

That's irrelevant.  Even a trustee in bankruptcy might have continued this suit, if it has merit.

And you can't just take a seat on a tax suit.  Once the statute of limitations for the year has passed, you lose your right to sue.

[cinyc]

Isn't this just wasting more bailout money for legal fees? Sit down, shut up, and enjoy the billions.

No.  AIG and the IRS have a dispute over how much taxes the company owed in prior years.  That's the type of thing that should get decided by the courts.  Believe it or not, the IRS isn't always right on these matters.

And the board has a duty to its minority shareholders to get any overpaid taxes back.   If Mr. X owns 80% of the company, and the company overpays Mr. X too much for something, Mr. X would be unjustly enriched and is effectively screwing the other 20% out of what should be their money.  That Mr. X is the government here is irrelevant.  The government bought this pile of crap instead of putting it into bankruptcy, as it should have.

But had Mr. X not bought 80% of this company they would not have the money to sue for this possible overpayment. They need to take a seat until they start paying us back.

That's irrelevant.  Even a trustee in bankruptcy might have continued this suit, if it has merit.

And you can't just take a seat on a tax suit.  Once the statute of limitations for the year has passed, you lose your right to sue.

And we can't just call it even? We payed them $170 billion and they want $300 million more? Why can't they just pretend that some of that bailout money was paying them back for the overtaxes?

It really is ridiculous that they are spending the money the government gave them to recover extra money they gave the government. Not to mention, who the hell is running their PR?

No, we can't just call it even - nor should we.  If AIG has a case, it has a case.  Assuming the case has merit, it's not in the interests of AIG's minority shareholders to just give up.  And I doubt they are spending $300 million to get back $300 million.  That would be foolish.

Who says they are spending the money the government gave them on this lawsuit?  AIG still has billions of dollars in revenues that don't come from the government.  People are still paying their car insurance bills, buying insurance policies, etc.  Every dollar AIG spends is NOT taxpayer money.

[cinyc]

Regardless of whether the money they use for the suit is TARP or not, they should not be suing the government for $300 million after the government provided $170 billion to them. How about the government withdraw some of what they just gave and then use it to pay AIG the money they are asking for now. Obviously this won't happen, but you see why this is just ridiculous. It doesn't help the minority shareholders to have the company torn to shreds in PR terms for an amount of money that doesn't come close to what they have already been given by the same entity.

It doesn't sound like AIG just got up one day after it received its bailout and said "gee, let's see if we can sue the federal government today over some non-issue we'll just make up".  Contesting any tax issue is a long, drawn out process that takes years.  No doubt this case has been in the works for at least that long.  And I wouldn't be surprised if the ball got rolling well before any government money was received.

[cinyc]

Well if AIG wins the government can (and should) just deny them the amount they won in TARP funds. Problem solved. AIG doesn't win anything in the end.

Besides a hefty legal fee of course. The second TARP funds were delivered this case should have been dropped.

Why?  If the IRS' position is wrong, it is wrong.  Not fighting it not only gives up the taxes allegedly owed, but sets a precedent for similar taxes supposedly owed in future tax years that haven't been examined yet.   

In theory, AIG will be a private company again some day.  And a lot of the TARP money for AIG was in the form of loans, not equity.