AIG uses tax payer money to sue their majority owner, in this case the US Government, to recover some $306 million in tax payments, some related to offshore tax havens.
The lawsuit, filed on Feb. 27 in Federal District Court in Manhattan, details, among other things, certain tax-related dealings of the financial products unit, the once high-flying division that has been singled out for its role in A.I.G.’s financial crisis last fall. Other deals involved A.I.G. offshore entities whose function centers on executive compensation and include C. V. Starr & Company, a closely held concern controlled by Maurice R. Greenberg, A.I.G.’s former chairman, and the Starr International Company, a privately held enterprise incorporated in Panama, and commonly known as SICO.
The lawsuit contends in part that the federal government owes A.I.G. nearly $62 million in foreign tax credits related to eight foreign entities, with names like Lumagrove, Laperouse and Foppingadreef, that were set up or controlled by financial products, often through a unit known as Pinestead Holdings.
United States tax law allows American companies to claim a credit for any taxes paid to a foreign government. But the I.R.S. denied A.I.G.’s refund claims in 2008, saying that it had improperly calculated the credits. The I.R.S. has identified so-called foreign tax-credit generators as an area of abuse that it is increasingly monitoring.
The remainder of A.I.G.’s claim, for $244 million, concerns net operating loss carry-backs, capital loss carry-backs, a general refund claim and claims for refunds of other tax-related payments that A.I.G. says it made to the I.R.S. but are now owed back. The claim also covers $119 million in penalties and interest that A.I.G. says it is due back from the government.
This is all unrelated, of course, to Congresses approving a 90% levy on bonuses paid to AIG yesterday. It’ll remain to be seen how the lawsuit to recover taxes affects the governments plan to tax bonuses.
AIG should start treading on careful ground. One gets the sense that they are beginning to play the role of Marie Antoinette and King Louis XIV in an American version of the French Revolution. But honestly? If that’s what it takes to get the message to these robber barons, then maybe that’s what has to be done.
It’s high time people in this country began to get angry.