Whistleblower Sues AIG for Fraud During Government Bailout

By Jason Enzler

Alex Grabcheski, the former director of human resources and operations for American International Group, has filed a False Claims Act complaint against the insurance giant alleging that it defrauded the government during the Fed’s $25 billion bailout of AIG in the wake of the financial crisis. As reported here, the lawsuit commenced in 2010 but the complaint was not unsealed until this week when the government declined to intervene in the matter.

According to the complaint, “at a time when AIG owed more than $60 billion to the Federal Reserve Bank of New York, AIG knowingly misrepresented facts relevant to the valuation of two of its subsidiaries in connection with agreements whereby interests in those subsidiaries would be transferred to the Bank in exchange for a $25 billion decrease in AIG’s indebtedness.” Mr. Grabcheski alleges AIG improperly overvalued these assets to include operations involved in illegal activity.

News of the recently unsealed qui tam complaint comes on the heels of another whistleblower complaint against AIG that was dismissed just last month. In that lawsuit, the whistleblowers alleged that AIG and others defrauded the government in connection with $137 billion in bailout funds. It was dismissed after a finding that the lawsuit was based on information already in the public domain.

For those interested in following the current lawsuit, the docket is listed in the District Court for the Southern District of New York as United States ex rel. Grabcheski v. American International Group Inc., No. 1:10-cv-03902.