Greenberg’s Starr Sues U.S. Over Tax Dispute

By | September 21, 2014

Maurice “Hank” Greenberg’s Starr International Co. seeks a refund for overpayment of taxes for 2007 in a $38 million lawsuit against the U.S.

The Internal Revenue Service has taken no action on Starr’s refund claim for 2007 even though it approved a $21 million refund for 2008 “based on the same material facts” as the demand for the previous year, according to the complaint filed today in federal court in Washington.

The dispute was triggered by the move of Starr, also known as SICO, from Ireland to Zug, Switzerland, as a consequence of its litigation with American International Group Inc., a company Greenberg headed until he resigned in 2005. SICO remained a major AIG shareholder after Greenberg’s departure.

Starr moved because its general counsel “determined that Switzerland was the best jurisdiction to protect SICO’s assets from AIG’s claims,” according to the complaint.

The move also prompted the IRS to withhold federal income tax on AIG dividends paid to SICO at a rate of 30 percent, instead of the 15 percent in effect when the company was in Ireland, SICO’s attorney, Kevin Downing, of Miller & Chevalier Chartered, wrote.

The IRS should have kept the withholding at 15 percent, a rate SIC0 was entitled to under a U.S.-Swiss tax treaty because it had “substantial non-tax reasons for establishing its residence within Switzerland,” according to the complaint.

No Consultation

The IRS abused its discretion when it failed to consult with Swiss authorities about the benefits SICO was entitled to, Downing wrote.

Dean Patterson, an IRS spokesman, didn’t immediately respond to an e-mail requesting comment on the lawsuit.

SICO’s tax complaint comes days before it goes to trial in a separate suit seeking more than $25 billion in damages over the U.S. government’s 2008 bailout of AIG.

In that trial, slated to begin Sept. 29, SICO alleges that the assumption of 80 percent of AIG’s stock by the Federal Reserve Bank of New York violated shareholders’ constitutional rights to due process and equal protection.

The tax case is Starr International v. U.S., 14-cv-01593, U.S. District Court, District of Columbia (Washington).

–With assistance from David Voreacos in federal court in Newark, New Jersey.

Topics Lawsuits USA AIG

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