AIG Financial Products Corp. et al v. Arthurs et al

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:)Chapter 11
)
AIG Financial Products Corp.)Case No. 22-11309 (MFW)
)
Debtor. )
______________________________)
)
AIG Financial Products Corp.)Adv. No. 23-50110 (MFW)
AIG, Inc.,)
)
Plaintiffs,)
)
v.)
)
Lee Arthurs, et al.,)Related Docs: 2, 8, 20, 24,
)163, 165, 166, 167, 217, 218,
Defendants. )222
OPINION
1
Before the Court are several issues raised in the Complaint
filed by AIG Financial Products Corp. (“FP”) against some of its
former senior level employees (collectively “the Former
Executives”) and raised in the counterclaims by the Former
Executives against FP and American Insurance Group (“AIG”).
2
For
purposes of judicial economy, the Court decided to try the claims
1
This Opinion constitutes the findings of fact and conclusions of
law of the Court pursuant to Rule 7052 of the Federal Rules of
Bankruptcy Procedure. To the extent it is determined that the Court
does not have authority to enter a final order on any of the claims,
this Opinion shall constitute the Court’s proposed findings of fact
and conclusions of law. See 28 U.S.C. § 157(c).
2
Adv. D.I. 1, 8, 11. Citations to the docket in the adversary
proceeding are to “Adv. D.I. #.” Citations to the record in the main
case are to “D.I. #.” FP’s exhibits are “DX-#,” Joint Exhibits are
“JX-#,” and the Former Executives’ Exhibits are “CCPX-#.” All
citations to transcripts are to “[date] Tr. [witness] at [page:line].”
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 1 of 151

and counterclaims in the Complaint in two phases.
3
After a nine-
day evidentiary hearing and briefing on the following issues (the
“Initial Issues”), the Court concludes that judgment should be
entered in favor of the Former Executives, and against FP and
AIG, on the recharacterization, equitable subordination, and
prima facie tort claims while judgment should be entered in favor
of FP and AIG, and against the Former Executives, on the
successor liability and tortious interference with contract
claims.
I.JURISDICTION
The Court has subject matter jurisdiction over the claims in
this adversary proceeding.
4
The Court concludes that the
recharacterization and equitable subordination claims are core
matters because they require the Court to determine the priority
of competing claims against FP’s estate.
5
The successor liability and tort claims are non-core claims
because they are based on state law and do not invoke a
substantive right under the Bankruptcy Code or arise in the
3
08/28/2024 Tr. at 47:1-48:23.
4
28 U.S.C. §§ 1334(b) & 157(a).
5
See United States v. State St. Bank & Tr. Co., 520 B.R. 29, 38
(Bankr. D. Del. 2014) (finding that recharacterization and equitable
subordination claims were core claims).
2
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 2 of 151

context of the bankruptcy case.
6
The Court has related-to
jurisdiction over those claims, however, because their resolution
will have a substantial effect on the bankruptcy estate if AIG is
required to pay the Former Executives’ claims.
7
FP and AIG have consented to entry of a final order or
judgment by this Court.
8
Although the Former Executives
originally did not consent,
9
they have now asked this Court to
make “a final determination of whose claim [AIG’s or the Former
Executives’] is superior in payment.”
10
Therefore, the Court
6
See, e.g., Official Comm. of Asbestos Claimants v. G-I Holdings,
Inc. (In re G-I Holdings, Inc.), 295 B.R. 211, 217 (D.N.J. 2003)
(holding that alter ego and successor liability claims against a
related non-debtor were non-core claims because they existed
independently of any bankruptcy case and did not require analysis of
bankruptcy law to resolve).
7
Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)
(describing non-core related claims). See also ConocoPhillip Co. v.
SemGroup, L.P. (In re SemCrude, L.P.), 428 B.R. 82, 99-100 (Bankr. D.
Del. 2010) (holding that the Court had related-to jurisdiction over
third parties’ declaratory judgment actions against non-debtors
because those actions would determine how much was owed by or to the
debtor’s estate); Kelly v. Kurtz, 219 A.3d 948, 968 (2019) (stating
the rule that a plaintiff is barred from recovering twice for the same
injury under two different legal theories).
8
Adv. D.I. 2 ¶ 7; Adv. D.I. 24 ¶ 63.
9
Adv. D.I. 11 ¶¶ 7, 63.
10
See 08/24/2024 Tr. (Counsel for the Former Executives) at 38:16-
22 (“Finally, Your Honor, as this Court observed in its decision
denying AIG’s motion to dismiss, a final determination of whose claim
is superior in payment must await a final resolution of this adversary
proceeding. The employee plaintiffs agree with this and think that
our proposal is the most straightforward and efficient way to proceed
to conclude the adversary proceeding.”). See also Adv. D.I. 11 ¶ 86
(Answer, Counterclaim and Crossclaims of Former Executives asking
Court for entry of judgment in their favor on the counterclaim and
crossclaims); Adv. D.I. 216 ¶ 894 (Post-trial Brief of the Former
Executives asking the bankruptcy court to grant judgment in their
3
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 3 of 151

concludes that it has authority to enter a final judgment in this
adversary proceeding.
11
II.FINDINGS OF FACT
12
A.Relationship between AIG and FP
FP began in 1987 as a wholly owned subsidiary of AIG to
conduct business in the derivative contracts market.
13
In order
for FP to conduct business in that market, AIG guaranteed FP’s
obligations to counterparties to the derivative contracts (the
“Guarantee”).
14
favor on the Initial Issues).
11
Wellness Int’l Network, Ltd. V. Shariff, 575 U.S. 665, 683-84
(2015) (holding that a bankruptcy court may enter a final order with
parties’ implied consent). See also 28 U.S.C. § 157(c)(2). If it is
determined that the Court does not have authority to enter a final
order, however, this Opinion shall constitute the Court’s proposed
findings of fact and conclusions of law. See id. § 157(b)(2)(O) &
(c)(1).
12
This section and any factual findings recited in the Conclusion
of Law section constitute the Court’s findings of fact pursuant to
Rule 7052 of the Federal Rules of Bankruptcy Procedure or, if
applicable, the Court’s proposed findings of fact and conclusions of
law pursuant to section 157(c) of title 28.
13
D.I. 2 ¶ 10 (Kosturos’s First Day Declaration) (“[FP] was founded
on January 27, 1987 as a joint venture between [AIG] and a group of
Drexel Burnham Lambert bankers, led by Howard Sosin. As envisioned by
AIG Inc.’s then-CEO and Chairman, AIG FP was created to originate and
sell complex derivatives, allowing AIG Inc. to access these markets in
order to generate attractive returns on its capital.”); 04/21/2025 Tr.
(Habayeb) at 45:6-7 (“FP was just one of the businesses that AIG
owned.”).
14
DX-4 (AIG Guarantee). See 02/06/2025 Friedland Dep. at 295:7-10
(“Well, without the guarantee, [FP] would not have been able to have
entered all the [derivative contracts] that it entered into prior to
2008.”); 04/21/2025 Tr. (Habayeb) at 51:23-25 (“AIG provided the
4
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 4 of 151

B.The Financial Crisis
In 2007 and 2008, volatility led to a crisis in the
financial markets.
15
The financial crisis prompted FP’s
derivative contracts counterparties to demand billions of dollars
in collateral calls, pushing FP to the brink of collapse and
making it totally reliant on AIG for cash.
16
The accelerating
collateral calls on FP endangered AIG itself because of its
Guarantee of those obligations.
17
AIG was unable to secure
guarantee to counterparts to AIG FP that if AIG FP is unable to
perform under the contracts, AIG would step in and make them whole.”).
15
04/21/2025 Tr. (Habayeb) at 53:4-11 (“So starting around the
middle of 2007, there was growing concern about the quality of
residential mortgage loans underwritten. And there was a lot of
uncertainty on who was sitting on that risk. And that created fear in
the market, and we saw a lot of volatility that continued into 2008.
And that concern and volatility led to liquidity problems and other
issues that put pressure on financial institutions, and we saw a
number of them fail.”).
16
Id. at 53:14-21 (“So FP was being subjected to pretty material
collateral calls on their derivatives, especially on the credit
default swaps on the multi-sector CDO. . . . And FP ran out of cash,
and AIG had to step in and start advancing cash to meet FP’s
obligations.”).
17
Id. at 53:24-54:3 (“In September of 2008, AIG was downgraded as
the rating agencies over the course of 2008 were getting concerned
about AIG’s liquidity position, given the demands on the parent
liquidity from the FP program as well as the SEC lending program.”),
166:6-9 (“Q. And if AIG FP didn’t post collateral to its
counterparties, that would put AIG at risk of cross-default because of
the guarantee; correct? A. Correct. That’s my understanding.”).
See JX-94 at 117 (AIG’s 10-Q for period ending September 2008
(describing “$377 billion in net notional exposure [of AIG] on AIGFP’s
super senior credit default swaps”).
5
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 5 of 151

funding from private parties to fix its liquidity issues.
18
On
September 15, 2008, ratings agencies downgraded AIG’s long-term
debt, triggering additional collateral calls on FP’s derivative
contracts.
19
The counterparties’ increasing demands raised the
specter of FP defaulting, which would cause potentially fatal
cross-defaults at AIG.
20
On September 22, 2008, the Federal Reserve Bank of New York
(the “Fed”) extended a two-year, $85 billion loan to AIG (the
“Fed Revolver”).
21
The Fed Revolver permitted AIG to use the Fed
18
04/21/2025 Tr. (Habayeb) at 55:7-11 (“Starting in August and
leading up to September, AIG started exploring third-party solutions
to raise capital or liquidity. And then that culminated in being
unable to get anything done on the private side and having the last
resort being the New York Fed.”).
19
CCPX-1057 at 18 ¶ 27 (Plastino’s Expert Report) (“On September
15, 2008, [S&P], [Moody’s], and [Fitch] downgraded AIG’s long-term
debt rating. This triggered [FP]’s obligation to post billions of
dollars in additional collateral under its [derivative] contracts. . .
. At this time, [FP] estimated that it needed more than $20 billion
to fund collateral calls and transaction termination payments.”).
20
CCPX-1057 ¶ 28 (Plastino Report) (“[FP] did not have the funds to
independently make [the collateral calls]. Mounting collateral
obligations and losses squeezed [FP]’s and AIG’s resources. As of
September 2008, this worsening financial condition had the potential
to further trigger rating agency downgrades and, in turn, more
collateral calls in an escalating cycle.”); 04/21/2025 Tr. (Habayeb)
at 91:22-23 (“[T]o sustain some of the positions we had in FP, we
needed more cash than what we had at AIG.”), 166:10-13 (“Q. If FP had
not posted the collateral, that would have signified an event of
default for AIG? A. AIG would have to perform under the guarantee.
And if it didn’t, I believe then it’s an event of default.”);
04/25/2025 Tr. (Liebergall) at 59:19-21 (“[The cross default] would
have a devastating effect. And it would cross-default - beyond the FP
world, it would impact liabilities in the FP world as well.”).
21
DX-26 §§ 1.01, 2.04(a), 2.08(a). See 04/21/2025 Tr. (Habayeb) at
57:22-58:6 (“[T]his happened right after [the Fed] let Lehman fail.
And there was concern that letting AIG fail, the financial system
can’t handle both failing, especially so close to each other.”);
6
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 6 of 151

Revolver to lend funds to its subsidiaries, as long as the loans
were made at arm’s length and were not secured.
22
However, it
prohibited AIG from making equity contributions to its
subsidiaries, except to the extent it had already made a
commitment to do so or obtained a waiver from the Fed.
23
Once AIG received funds from the Fed, it immediately
advanced some of those funds to FP to meet counterparties’
collateral calls.
24
To do so, AIG sent money to a subsidiary,
AIG Funding, Inc. (“AIG Funding”) which then transferred the
04/22/2025 Tr. (Gender) at 133:16-20 (“In general, AIG had a lot of
cross-exposure with Wall Street and many of the major banks. And so
the fear was that if AIG collapsed, it would have a significant impact
on the overall liquidity of Wall Street in general and really
worldwide.”).
22
See, e.g., DX-26 §6.01(c), § 6.02, § 6.04(c), §6.07. See also
04/22/2026 Tr. (Gender) at 201:2-5 (“Q. And that was because the loan
between the Fed and AIG, Inc. prohibited those intercompany fundings
to be secured, right? A. Correct.”), 201:16-18 (“Q [The Fed] had a
pledge of all or virtually all of AIG’s assets; right? A.
Correct.”).
23
DX-26 § 6.04(a). See also 04/23/2025 Tr. (Herzog) at 48:17-20
(“[AIG] couldn’t do activities like [recapitalize FP] without [the
Fed’s] approval or knowing that they wouldn’t object to it.”).
24
JX-20 (Schedule to Promissory Note indicating a $26 billion
advance to FP on September 22, 2008, and additional advances totaling
$13 billion between September 23 and September 30, 2008); 04/25/2025
Tr. (Liebergall) at 81:4-14 (“Q. And you would give [Robert Gender,
Treasurer at AIG] information that would determine what the ultimate
line was - how much cash AIG would actually lend, finance, to AIG FP;
right? A. . . . . So, we would track our principal and interest;
all of our obligations, whether they were derivatives or assets and
liabilities to ensure that we were able to make payments on those.”).
7
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 7 of 151

money to FP.
25
The stream of funds to FP from AIG was later
documented as a loan from AIG Funding (“the FP Revolver”).
26
FP
stopped originating new derivative contracts
27
and used the cash
from AIG to wind down its business by novating or consensually
terminating the derivative contracts in its portfolio.
28
As the financial crisis unfolded, AIG installed AIG
employees as FP executives and directors. By October 2009, the
CEO of FP, William Dooley, was an employee of, and paid by,
25
04/22/2025 Tr. (Gender) at 134:22-23 (“And then AIG then would
use the proceeds [from the Fed Revolver] to send to its internal bank,
essentially, which is AIG Funding.”).
26
JX-1; JX-20.
27
04/22/2025 Tr. (Gender) at 26:14-18 (“Q. And other than as
hedges for existing positions, after 2008, did FP ever offer new
derivative instruments to the market? A. No. The only derivatives
that FP traded were to hedge its existing portfolio.”); 04/21/2025 Tr.
(Habayeb) at 95:2-6 (“Q. Did the complex derivatives business cease
operations in connection with the FP wind-down? A. So if you’re
referring by complex derivatives like creating structured notes for
others, yes. Same thing with the creditor of the portfolio. That all
stopped.”).
28
04/25/2025 Tr. (Liebergall) at 61:2-11 (“Q. And did your
responsibilities change when the wind-down started versus what they
were before the wind-down? A. Yes. Q. How so? A. Prior to the
wind-down, we were obviously all the front office folks, which I was
part of, were looking to generate revenue for FP and AIG, Inc. Post-
crisis, all of the attention of our - all of our duties moved to
reducing risk and working with AIG to mitigate risk.”), 65:16-24
(“Profitability was generally not profitability. It was how much we
were going to lose. As we were winding down and counterparties were
being opportunistic, we were generally having to exit trades at their
side of the market, meaning they were getting favorable terms versus
us. So, there was a profitability target that likely said if it
involved losing a certain amount of money, we were okay to do that.
If it went beyond that, there were certain levels that then would
trigger a steering committee approval.”).
8
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 8 of 151

AIG.
29
At that same time, FP’s CFO reported directly to an AIG
employee, Elias Habayeb.
30
In October 2008, FP’s Board of
Directors had only two directors: one independent director
(Martin Feldstein) and one employee of AIG (Dooley).
31
By
February 2010, FP’s Board had only two members, and both were AIG
employees (Dooley and David Herzog, the CFO of AIG).
32
Dooley
and Herzog considered themselves AIG employees, not FP
29
4/21/26 Tr. 115:2–9 (Habayeb) (“Q. Just to shift to your upward
reports, your bosses, as CFO of FSD you reported to AIG’s CFO and CO;
correct? A. AIG’s CFO and FSD’s CEO. Q. Right. And just to put a
name to those two positions, those would be Bill Dooley and David
Herzog; correct? A. Correct. Q. Both of whom were AIG employees?
A. Correct.”), 127:11–13 (“Q. Mr. Dooley served in a dual capacity
as FP’s CEO and FSD’s CEO; correct? A. That’s correct.”); 08/10/2022
Dooley Dep. at 23:15–24:5 (“I was treasurer of AIG for a while. I was
in charge of the financial services companies at AIG. . . . I was the
CEO of [FP] at some point in time, and maybe that – which was probably
the in the ’08 time frame. I’m not sure exactly when I retired from
that position, but I guess it was pretty – around the time of my - my
retirement [in 2015].”), 38:25-39:4 (“I was an [AIG] employee. So I
was compensated from [AIG]. Q. So you always viewed yourself as an
[AIG] employee, is that correct?” A. Absolutely.”).
30
04/21/2025 Tr. (Habayeb) 114:5–20 (“Q. And when you were FSD’s
CFO, FP’s CFO reported to you; correct? A. On a matrix basis, yeah.
Q. On a matrix basis. At one point, this person was Mr. Balfan, Mr.
Mark Balfan? A. Yes. Q. And you were one of his two bosses; right?
A. That’s correct. Q. And you had a similar downward reporting
relationship with all of FP’s CFOs between 2007 and 2009. Do I have
that right? A. That’s true. And any of the subsidiaries in
financial services. Q. Okay. And that would include FP? A. That
would include FP.”).
31
CCPX-961 at 68 (FP’s Report to the Secretary of State of
Connecticut dated 10/31/2008).
32
Id. at 71 (FP’s Report to the Secretary of State of Connecticut
dated 02/03/2010).
9
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 9 of 151

employees.
33
AIG controlled every aspect of the FP wind-down.
34
AIG
focused the winddown on limiting AIG’s exposure on its Guarantee.
At that time, AIG did not consider an FP bankruptcy filing to be
viable because FP’s derivative contracts would be subject to the
safe harbor provisions of the Bankruptcy Code
35
and would result
33
04/23/2025 Tr. (Herzog) at 57:11-13 (“Q. Now, again, were you
making this statement and this decision [about the Compensation Plans]
in your capacity as CFO of AIG, Inc.? A. Yes.”); 08/10/2022 Dooley
Dep. at 39:2-4 (“Q. So you always viewed yourself as an [AIG]
employee, is that correct?” A. Absolutely.”). See also id. at
12:18-22 (Herzog forgot that he was a member of FP’s board).
34
4/21/2025 Tr. (Habayeb) at 89:24-90:2 (“Q. And at a high level,
what was the purpose and role of the steering committee? A. So the
purpose and role was to provide oversight and direction over the wind-
down of FP.”), 150:10-17 (“Q. You said, you testified you were part
of the steering committee that oversaw FP’s wind-down? A. Yes. Q.
Were you a voting member? A. No. Q. So there’s a distinction
between voting members and nonvoting members; yes? A. Correct.”),
150:24-151:7 (“Q. Fair to say that voting members were AIG executives
and leaders? A. Correct. Q. And AIG was the one who decided who
sat on the steering committee; right? A. Well, yeah. They designed
the steering committee initially to kick it off. But for the FP who
participated and who ran it, it was consulted - with consultations
with William Kolbert and Pierre and others at the time.”); 04/25/2025
Tr. (Liebergall) at 63:11-14 (“Q. Who had voting rights? A. The
people on the committee which, to the best of my knowledge, consisted,
I believe, primarily or almost exclusively of [AIG] individuals.”),
65:1-6 (“[W]e had performance metrics at that time that were part of
the wind-down plan directed by the - implemented by the steering
committee. That plan focused on derisking the AIG FP portfolio and
had different types of metrics in order to confirm that that derisking
was occurring.”), 66:14-15 (“Q. And who approved these [performance]
metrics, sir? A. The steering committee.”). See also CCPX-514 at
15(“Performance Metrics, Performance Assessment, and Award
Determination”). But see 04/21/2025 Tr. (Habayeb) at 47:25-48:2)
(“When we went into winddown, we created a steering committee to
oversee the winddown but the day-to-day operations stayed with the FP
management team.”).
35
11 U.S.C. § 362(b)(7) (the automatic stay does not stay the
exercise of any right of a party to a securities contract, including
the right to terminate the contract and offset its claim against any
10
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 10 of 151

in billions of dollars of exposure to AIG as a result of its
Guarantee.
36
C.The Compensation Plans
Historically, FP compensated its senior level employees,
including the Former Executives, with base salaries and large
bonuses.
37
In 1995, FP created the Deferred Compensation Plan
(“DCP”) to, inter alia, retain capital in FP and align the
incentives of FP and the Former Executives.
38
Under the DCP, the
Former Executives were entitled to receive collectively deferred
compensation calculated as 30% of FP’s “Distributable Income.”
39

collateral it holds or obligations it has under the contract),
§ 546(e) (precluding a debtor from avoiding any “transfer made by or
to (or for the benefit of) a . . . financial institution . . . in
connection with a securities contract. . . .”), § 560 (authorizing
counterparties to liquidate, terminate, or accelerate swap agreements
in the event of a bankruptcy filing by the other party to the
agreement).
36
See DX-394 ¶ 21 (Imburgia Report) (as of September 30, 2008, “AIG
reported that [FP]’s net notional exposure on its super senior CDS
portfolio was $377 billion.”). See also JX-94.
37
04/25/2025 Tr. (Liebergall) at 70:3-8 (“Q. And at a high level,
sir, how were you compensated while you worked at FP? A. Like the
less - like the rest of Wall Street, it was generally a fairly small
salary and then a high amount of bonus based on your performance and
the organization’s performance.”).
38
JX-2. See also D.I. 2 ¶ 43 (Kosturos’ First Day Declaration)
(“To align incentives for long-term growth over short-term profits, a
portion of these profits was not paid out immediately to AIG Inc. or
the executives, but rather was deferred, to be paid in the future,
subject to various adjustments and conditions. This arrangement was
reflected in the AIG FP Deferred Compensation Plan, dated December 1,
1995.”).
39
JX-2 § 1.08 (“Distributable Income” shall mean, with respect to
any financial year of [FP], revenues, less expenses and credit and
market reserves taken for that year, as the same shall be determined
11
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 11 of 151

That deferred compensation was reflected as a credit to the
Former Executives’ accounts in the DCP and as an unsecured debt
owed by FP; no funds were actually placed in the accounts,
segregated, secured, placed in a trust, or earmarked for payment
of the DCP obligations.
40
In the event of FP’s bankruptcy or
insolvency, any claim the Former Executives had under the DCP
would be subordinated to the claims of all other creditors of
FP.
41
FP was to pay the deferred compensation over time in
installments that corresponded to the lifecycle of certain
financial transactions.
42
by the [Board of Directors of FP].”); 04/21/2025 Tr. (Habayeb) at
116:4-6 (“Q. And FP’s distributable income was intended to be FP’s
annual economic P&L, is that fair? A. Correct.”). See also
04/21/2025 Tr. (Habayeb) at 118:5-11 (“Q. And the distributable
income, it assumed full mark to market; correct? A. Correct. Q. And
mark to market, just to orient the Court, means unrealized gains and
losses? Yes? A. Yes.”).
40
JX-2 § 4.01(a)(i)-(iii) (“(i) the payment of benefits payable
hereunder to each of the Participants and their Beneficiaries and to
AIG shall be made only from the general funds of AIG Financial
Products Corp., (ii) [FP] shall not segregate or earmark any of its
assets nor hold any assets in trust or in any special account for this
purpose, and (iii) none of the Participants, the Participants’
Beneficiaries or AIG shall have any legal or equitable interest in,
lien on, or claim to, any particular asset of [FP] by virtue of this
Deferred Compensation Plan.”).
41
Id. § 4.01(a) (“the obligations under this Deferred Compensation
Plan to Participants and their Beneficiaries and to AIG shall be
subordinate and junior in right of payment and otherwise, to the prior
payment in full of all of the other obligations of [FP], whether now
existing or hereafter incurred, except to the extent payment of any
such obligations is expressly made subordinate to or pari passu with
the payment obligations hereunder.”).
42
Id. § 3.05(b).
12
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 12 of 151

The participating Former Executives’ account balances,
however, were subject to reduction if FP sustained losses greater
than its current year income and market and credit reserves.
43

If losses reduced the account balances, FP had an obligation to
establish a plan to restore the participating Former Executives’
account balances from future profits.
44
If FP did not restore
the account balances prior to December 31, 2013, however, that
obligation would lapse.
45
Unlike the obligations FP had to
derivative contract counterparties, AIG did not guarantee FP’s
obligations under the DCP.
46
As the financial crisis deepened, FP created the Special
Incentive Plan (“SIP”).
47
Similar to the DCP, the SIP’s goal was
to build and maintain capital at FP while aligning FP’s Former
Executives’ incentives with the company’s incentives by having
43
Id. § 4.01(b).
44
Id.
45
Id. (“Any such restoration plan shall provide that any restored
amounts shall be paid in 2013; to the extent amounts have not been
restored by December 31, 2013, all restoration rights shall
permanently lapse except to the extent [FP] determines that it may
amend the Plan to provide for payment of restored amounts without
violating Internal Revenue Code Section 409A.”).
46
Id. § 4.01(a) (“The benefits payable hereunder shall constitute
an unsecured debt of [FP] to the Participants and their Beneficiaries
and to AIG and shall not have the benefit of any guarantee by AIG of
payment obligations of [FP].”).
47
CCPX-2 (SIP); CCPX-671 ¶ 30 (11/06/2017 “First Witness Statement
of William Dooley” in the UK Litigation) (describing the creation of
the SIP in January 2008).
13
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 13 of 151

them share in FP’s losses, as well as its profits.
48
At FP’s
sole discretion, employees who earned certain bonuses would be
eligible to receive a SIP Credit.
49
Similar to the DCP, the SIP
was to be paid from FP’s general funds, was subordinated to all
creditors in the event of a bankruptcy, was not guaranteed by
AIG, and had the same restoration and sunset provisions.
50
(The
DCP and the SIP are collectively referred to herein as the
“Compensation Plans.”)
At the time of the financial crisis, FP also created an
Employee Retention Plan (the “ERP”) which was meant to retain key
employees responsible for FP’s winddown.
51
Under the ERP,
48
CCPX-2 at 1 (iii), (iv) (“The purpose of the 2007 SIP is to
provide an additional compensation opportunity for Covered Executives
while at the same time: . . . (iii) continuing to ensure that [FP]’s
and its employees’ interests are aligned with those of AIG and AIG’s
shareholders, and (iv) building and maintaining the formation of
capital in [FP], including for purposes of ensuring that amounts are
available to absorb losses in the event that [FP] realizes losses on
super senior credit derivatives that would have an impact on [FP]’s
capital structure.”). See also 04/25/2025 Tr. (Powell) at 16:21-17:2
(“Q. And based on your knowledge, what was the purpose of the SIP?
A. There had been unrealized losses in the super-senior CDO book -
however people want to refer to it - basically, the credit book in
London. And AIG wanted to acutely expose employees to the risk of
loss around those losses, and so this plan was put in place to do
that.”).
49
CCPX-2 § 3.01(a)(i) (“The 2007 SIP Credit for each Covered
Executive shall be determined by [FP] in its absolute discretion.”).
50
Id. § 4.01(a).
51
CCPX-3. See also DX-59 at 159 (PwC’s Report on the Results of
Examination for the Year Ended December 31, 2008) (“Certain key
management personnel within the organization have deep institutional
knowledge of AIGFP’s businesses, operations and related risk
exposures, which is crucial for the effective execution of the wind
down plan and managing the risks associated with the process.”); JX-94
14
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 14 of 151

executives who participated in the DCP
52
were entitled to receive
the same compensation in 2008 and 2009 that they had earned in
2007.
53
Unlike the DCP and SIP, AIG guaranteed the ERP
payments.
54
FP had no profits after 2008. AIG determined by late 2008
that FP’s future earnings would be unlikely to generate
sufficient proceeds to restore the Compensation Plans’ account
balances and had written off those obligations entirely.
55
Nonetheless, FP’s officers — AIG employees — told the Former
Executives that FP would be able to determine whether it had
sufficient assets to restore the account balances by the December
31, 2013, deadline to approve a restoration plan.
56
at 60 (Am. Ins. Group., Quarterly Report (Form 10-Q) (September 30,
2008)) (“A loss of key personnel could reduce the value of AIG’s
businesses and impair its ability to effect a successful asset
disposition plan.”).
52
CCPX-3 at 2 §§ 1.14 (“Covered Persons”), 3.05(a).
53
Id. § 3.01 (a)-(b). See also 04/25/2025 Tr. (Powell) at 18:10-14
(“So they took whatever your prior year’s compensation was and the ERP
guaranteed that you would get at least that much pay for the two
following years.”).
54
CCPX-3 § 3.03.
55
CCPX-105 at 1 (10/09/2008 email from Habayeb to Cenci stating
“SIP and Deferreds get written off. Retention amounts are not written
off at this time.”); CCPX-153 at 3-4 (11/07/2008 FP Deferred
Compensation Plans Memo) (“As a result of the overall situation and
assessment of [FP]’s capacity in generating future earnings,
management concluded that it is unlikely that [FP] would generate
enough earnings to pay current deferrals.”).
56
CCPX-104 at 4 (10/09/2008 Letter from William Dooley to FP
Employees); CCPX-191 at 2 (Memorandum from William Dooley to all
participants in the Compensation Plans).
15
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 15 of 151

D. Recapitalization Plan
In 2010, shortly before it repaid the Fed loan, AIG
considered recapitalizing FP by forgiving $35 billion of the FP
Revolver, applying an $18 billion tax payable it owed to FP, and
leaving the balance of the FP Revolver at $2 billion.
57
Doing so
would have eliminated FP’s negative equity.
58
AIG rejected the
recapitalization plan when it discovered that eliminating FP’s
negative equity would obligate FP to restore the Former
Executives’ accounts in the Compensation Plans.
59
It was shortly
57
JX-11 at 5 (“[AIG] will make a deemed payment of $53.7 B to [FP].
The deemed payment will consist of: $18.5 B to satisfy the potential
liability of [AIG] to [FP] under the tax sharing agreement; & $35.3 B
capital contribution to eliminate the negative equity in AIGFP”).
58
JX-13 at 3 (07/26/2010 Fed Funding Request: Business case and
supporting computations”) (“In order to further facilitate the unwind
process and correctly reflect the amount collectable from [FP], it is
proposed to eliminate the negative equity in [FP].”).
59
JX-14 at 2 (09/01/2010 email from Shea to Leahy and others) (“If
the proposed recapitalization substitutes equity for debt, thereby
creating a solvent FP with assets that could fund a restoration plan,
there is a significant risk that at some point prior to the expiration
of the limitations period, FP will face breach of contract litigation
demanding compliance with the restoration plan obligation. . . . this
would represent a potential $600 million liability of the worst
sort[.]”); id. at 1 (09/01/2010 email from Herzog to Rielly and
Gender) (“I don’t care how it’s driven, we’re not paying the deferred
comp.”); CCPX-451 at 2 (09/02/2010 email from Herzog to Leahy) (“Under
no circumstances should we restore benefits under any [deferred
compensation] plan.”); 04/21/2025 Tr. (Habayeb) at 124:17-19 (“I can
tell you the motivation behind not forgiving any portion of the loan
was that you would put the AIG shareholder at the disadvantage, and
they would get less of a recovery . . . .”); JX-15 at 2 (09/07/2010,
memo from Reilly to Herzog summarizing decisions made on September 3
conference call, including to reduce the “current recapitalization
proposal by an amount large enough so that indebtedness to more senior
creditors (DCP/SIP plans are secondary to all other creditors) is
greater than any [FP] ‘end of business’ cash flow projection.”)
(emphasis in original).
16
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 16 of 151

thereafter that the advances made by AIG to FP were documented as
a loan and signed.
60
AIG dictated the terms of the loan.
61
Due to FP’s financial condition from 2008 to 2013, FP never
made any payments to the Former Executives under the Compensation
60
JX-1; JX-20.
61
04/22/2025 Tr. (Gender) at 140:12-17 (“Q. And to your
understanding, did your team at treasury create [the FP Revolver] as
well? A. Yes, I believe so. Q. And were there any negotiations
with FP over the creation of this document? A. No. This is their
standard intercompany agreement.”), 206:6–8 (“Q. There’s no
negotiation with FP over the interest rate ascribed to [the FP
Revolver]; correct? A. No.”); 04/25/2025 Tr. (Liebergall) at 98:22-
99:12 (“Q. You characterized the funding as a loan even though you
knew by this time that there was not executed formal documentation for
the loan; right? A. Again, I didn’t - I didn’t know there was not
formal executed documentation. I had never seen it. And at that
point in time, to remind you, we were in the middle of a wind-down,
and we were - and particularly, my role in the - in the front office
was to derisk the company. And part of derisking the company was
ensuring that we can make our payments on our assets, our liability
and our derivatives. AIG was telling us here’s what - here’s what
you’re going to call it; here’s how it is. And we did that. That
wasn’t a - you know, our - our goal was not to do anything to
ultimately jeopardize the wind-down that would ultimately adversely
impact FP and [AIG].”), 114:24–115:7 (“ Q. Sir, did you ever
negotiate any terms for the funding arrangement between AIG and FP?
A. No. Q. Did you ever understand that those terms were up for
negotiation? A. No. Q. Did anyone ever suggest to you that you
could negotiate those terms? A. No.”). See also 04/23/2025 Tr.
(Herzog) at 79:12–16 (“Q. You don’t recall any negotiations about the
interest rate of the arrangement taking place, correct? A.
Negotiations between who? Q. Between FP and AIG. A. I don’t recall
negotiations.”); 04/22/2025 Tr. (Allison) at 56:1-12 (“Q. And the
whole time you’ve been the CFO of FP, you’re not aware of any
negotiations between [AIG] and FP to determine an interest rate? A.
That’s correct. Since I’ve been the CFO of FP or the chief accounting
officer of FP, generally the rate has been a standard rate plus a
number of basis points. Q. But you don’t know who agreed on the
current rate, do you, sir? A. That’s right. Q. And you’re not
aware of any negotiations over that rate the entire time you’ve been
the CFO? A. There haven’t been any, to my knowledge.”).
17
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 17 of 151

Plans.
62
On July 31, 2014, participants in the Compensation
Plans received a letter stating that the losses FP had sustained
since 2008 had wiped out the balances in their accounts and
prevented FP from restoring those account balances.
63
UK-based Former Executives sued FP and AIG in 2014 for
restoration of their accounts in the Compensation Plans. After
those Former Executives won at the trial level, that decision was
reversed on appeal in 2020.
64
US-based Former Executives brought
similar litigation against FP in 2019 in Connecticut.
65
E.Pre-Bankruptcy Transfers
In early 2022, FP was facing mounting pressure from the
Former Executives’ litigation.
66
On January 21, 2022, FP
62
04/25/2025 Tr. (Powell) at 43:16-18 (“Q. And to date, how much
of your outstanding [DCP] balance has been paid to you? A. Zero.”),
44:8-10 (“Q. Okay. And how much of [the SIP] has [FP] paid to you to
date? A. None.”).
63
CCPX-948 at 1 (07/31/2014 Letter to DCP/SIP Participants)
(“Moreover, while Section 4.01(b) provides for the restoration of
losses after providing for the satisfaction of all other creditors, no
restoration has been possible given the magnitude of losses sustained
by [FP]. Pursuant to amended Section 4.01(b), this restoration
obligation lapsed as of December 31, 2013 for U.S. Taxpayers and there
is no further liability to such participants under the DCP and SIP
Plans.”).
64
DX-201 (Approved Judgment in UK appeal dated January 24, 2020).
65
Arthurs et al. v. AIG Fin. Prods. Corp., No. X08-FST-CV-19-
6046057-S (Conn. Super. Ct.).
66
CCPX-709 at 3 (01/22/2022 email attaching a PowerPoint
presentation from AIG’s counsel to the Special Committee) (“This
presentation provides background relating to a potential chapter 11
bankruptcy filing by AIG Financial Products Corp. (“FP”) as a means to
advance its winddown most efficiently given its current balance sheet
. . . and ongoing litigation relating to its historical executive
18
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 18 of 151

appointed John Dubel and Pamela Corrie, who have extensive
experience in the restructuring industry, as independent
directors to serve on a Special Committee to consider FP’s
strategic alternatives.
67
Although hired by FP, the independent
directors had ties to counsel for AIG, who advised them of the
opportunity.
68
AIG’s counsel provided the Special Committee with
deferred compensation plan (the “DCP”). . . . While FP believes the
DCP claims are without merit, litigation is ongoing and is expected to
be costly and protracted. At present, a chapter 11 bankruptcy filing
by FP is a viable strategy for resolving this situation.”).
67
JX-39 (Unanimous Written Consent of the Board of Directors of
[FP] appointing Dubel and Corrie to the Special Committee); JX-40
(Unanimous Written Consent of the Board of Directors of [FP]
empowering Dubel and Corrie to consider restructuring alternatives);
DX-357 (Corrie’s Select Directorship/Restructuring Experience); DX-358
(Dubel’s Select Directorship/Restructuring Experience); 04/24/2025 Tr.
(Dubel) at 92:9-12 (“Q. Which entity engaged you and Ms. Corrie? A.
FP. Q. And which entity pays for your services? A. FP.), 94:20-
95:12) (“Q. [C]ould you briefly summarize for the Court what
authority was delegated to the Special Committee by the Board? A.
Sure. I mean, basically, anything having to do with looking at
alternatives and potential strategic transactions. Anything having to
do with any interplay of contracts or anything else between FP and any
of the other affiliated entities that were not necessarily directly
under our umbrella. Also, looking at anything as it had to do with
our subsidiaries and how they might have interplay with AIG or any of
its affiliates. We had the ability to, you know, we were responsible
for overseeing any of that information. We had responsibility for
negotiating with all of the various stakeholders in the company. We
had the ability to hire advisors and hire a chief restructuring
officer, which we did. And then basically whatever we came up with,
we would sit down, you know, and implement it.”).
68
03/15/2023 Pamela Corrie Dep. at 17:18-22 (“Well, [counsel for
AIG] asked me to [serve as] an independent director for the purpose of
determining what type of strategic transaction would best accomplish
the objective of winding down [FP].”); 04/24/2025 Tr. (Dubel) at
125:21-25 (“Q. And then [counsel for AIG] came back to you in late
2021, fair, to potentially undertake a similar engagement? A. Yes.
I can’t remember exactly when it was probably November, December, time
frame.”).
19
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 19 of 151

presentations explaining AIG’s view of FP’s situation.
69
The Special Committee ultimately agreed with AIG’s position
that FP should file a bankruptcy petition. In preparation for
that filing, the Committee directed that FP engage in a series of
transactions.
70
First, it authorized FP to set off $33.9
billion
71
in accounts payable it owed to its subsidiaries against
FP’s equity in those subsidiaries.
72
Second, it approved the
69
CCPX-709 at 3(“At present, a chapter 11 bankruptcy filing by FP
is a viable strategy for resolving [the Compensation Plan litigation].
In an FP bankruptcy, any DCP claims would be expressly non-guaranteed,
unsecured, and subordinated.”); JX-51 at 13 (04/13/2022 A&M Update to
the Special Committee of the Board presentation) (showing potential
losses of $163 to $510 million if FP retained the derivatives and
filed for bankruptcy versus losses of only $6 million if FP novated
the derivative contracts).
70
04/24/2025 Tr. (Kosturos) at 19:20-20:1-3 (testifying that the
Special Committee, not AIG made the decision to effectuate the
offsets); 04/22/2025 Tr. (Allison) at 43:5-8, 44:17-20 (confirming
that the Special Committee directed the offsets and novations, not
AIG); 04/24/2025 Tr. (Dubel) at 106:9-13, 115:15-17, 118:19-22 (the
Special Committee approved the offsets, the novations of derivatives,
and the transfer of the bonds and cash); 04/23/2025 Tr. (Stubbs) at
117:2-4 (“Q. And who made the final decision to go forward with the
novations? A. The special committee.”); JX-78 at 1 (Dec. 6, 2022
Unanimous Written Consent in Lieu of Meeting of Directors of AIG
Financial Products Corp.) (AIGFP “intends to, effective as of December
6, 2022, make a payment by way of transfer of a portion of the Cash
Pool Receivable in the amount of US$35,000,000 to [Matched
Funding].”).
71
The experts disagreed on the value of the offsetting
transactions. See DX-395 at 36 (identifying $34.159 billion in
offsets); DX-522 at 50 (identifying $33.670 billion in offsets). It
is not necessary for the Court to determine the exact value of those
offsets for purposes of the Initial Issues. For its analysis, the
Court assumes that the value was $33.9 billion (approximately the
midpoint between the experts’ figures).
72
JX-66 at 1 (9/27/2022 memo from Allison to Special Committee)
(“This memo documents the purpose and reasoning behind a series of
intercompany offsetting journal entries between [FP] and certain of
its subsidiaries. These intercompany journal entries are being
20
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 20 of 151

transfer (by novation) of 94 of FP’s 97 remaining derivative
contracts to an FP subsidiary, Matched Funding, and the
termination of the other three contracts by agreement with the
counterparties.
73
Third, the Special Committee allowed FP to
transfer cash and bonds to Matched Funding, to secure Matched
Funding’s obligations under the novated contracts
74
and to offset
completed to net down intercompany balances between FP and its wholly
owned subsidiaries against the ‘investment in subsidiaries’ on FP's
books. These balances primarily relate to historical intercompany
transfers between FP and its subsidiaries in the ordinary course of
business.”); JX-69 (9/29/2022 memo from Allison to Special Committee
explaining three additional offsetting transactions); 04/24/2025 Tr.
(Allison) at 37:24-38:7 (“Q. Can you describe to the Court what these
journal entries are that are reflected in the transaction? A. Sure.
The subsidiary, Pinestead Holdings, would record a dividend, which
would reduce its equity and pay or transfer its intercompany
receivable from FP to its parent. Its parent, [FP], would reduce its
investment in subsidiary by the amount of the dividend and would
receive the intercompany payable from itself, which it would offset
against the intercompany payable to Pinestead.”). See JX-50 at 2-3
(Allison’s memo describing the Pinestead offset in detail).
73
04/23/2025 Tr. (Stubbs) at 118:17-19 (“Q. You mentioned the 94
contracts that were novated. How many contracts did FP terminate
instead of novating? A. Three.”), 117:24-118:1 (So as part of the
reach-out to the counterparties, the first discussion was around:
Would you be interested in terminating the transactions and on what
terms?”), 123:11-14 (“[Matched Funding] was a logical place to put the
remaining FP derivatives. Matched Funding had liabilities that go out
to 2040-plus as a portfolio that’s a, you know, established portfolio
in the company.”), 123:17-124:23 (some contracts were novated to AIG
Markets, a sister company of FP, because the counterparties were
regulated banks and Markets already traded in that market, but Matched
[Funding] received the economic value of those transfers through pass-
through transactions).
74
04/26/2025 Tr. at 70:6-24 (Avery) (“Q. And now what is your
understanding why FP held bonds? A. The bond portfolio was used by
FP to post collateral against derivatives. Q. And based on your
review of the record, what percentage of the bonds were transferred
out of FP? A. A hundred percent. Q. And where did the bonds get
transferred to? A. To Matched Funding. Q. And based on your review
of the record, what is Matched Funding doing with those bonds now? A.
Continuing to hold those and manage day-to-day. As collateral needs
21
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 21 of 151

the value of those transfers against a payable it owed to Matched
Funding.
75
The value of the derivative contracts and related
cash and bonds transferred to Matched Funding was approximately
$1.1 billion.
76
ebb and flow, there is a change in the balances overall. But
fundamentally, Matched [Funding] is managing that bond portfolio
relative to the risk and the derivatives that exist at Matched
Funding. Q. And is that the same or different than what FP was doing
with them? A. The same.”); 04/24/2025 Tr. (Dubel) at 118:23-119:5
(“Q. Why did the Special Committee approve those transfers? A.
Those bonds, cash collateral effectively [were] cash collateral for
the contracts that we novated. And so we moved them over to Matched
[Funding] where the contracts had been novated to. . . . Have Matched
Funding have them so that they sat side by side with the contracts,
which is where they were previously when they were at FP, so it made
sense to move it with the contracts.”); JX-53 at 5 (06/15/2022
discussion with A&M and the Special Committee) (“All cash and bond
collateral will also move along with the novated positions.”). See
also 04/24/2025 Tr. (Kosturos) at 18:18-20 (the $35 million in cash
came from FP’s funds in the shared cash pool), 28:22-24 (FP’s bond
portfolio was transferred to Matched Funding), 29:3-30:1 (testifying
that most of the bonds had already been pledged by FP as collateral
for the derivative contracts and that the cash and remaining bonds
were transferred to meet future collateral needs of those contracts),
31:4-32:12 (FP transferred $35 million of its cash pool funds to
Matched Funding to give it additional liquidity and received fair
value for that transfer).
75
04/22/2025 Tr. (Allison) at 43:25-44:13 (FP received fair value
for the transfer of cash and bonds by offsetting the cash against a
liability FP owed to Matched Funding); 04/24/2025 Tr. (Kosturos) at
31:4-30:2-32:12 (FP transferred $35 million of its cash pool funds to
Matched Funding to give it additional liquidity and received fair
value for that transfer).
76
FP’s expert calculated that the value of the derivatives, cash
and bonds was $870 million, but he did not include the related
transfers to Markets, even though Matched Funding got their economic
value. DX-395 at 36. The Former Executives’ expert calculated the
value of the transfers to Matched Funding at $1.408 billion. DX-522 at
47. However, FP’s expert notes that the Former Executives’ expert
took the value of the derivatives on December 31, 2021, while they
decreased in value in 2022 by $162 million prior to the transfer. DX-
395 ¶ 64. Again, for its analysis, the Court assumes the value of the
transfers to Matched Funding, including the economic value it received
from the transfers to Market, was the approximate midpoint of $1.1
22
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 22 of 151

In preparation for the bankruptcy filing, FP requested its
own funds from the shared cash pool held at AIG.
77
Contrary to
the cash pool agreement,
78
AIG refused to release the funds.
79

Instead, shortly before the bankruptcy filing, AIG unilaterally
set off $127 million of FP’s funds in the shared cash pool
billion.
77
04/24/2025 Tr. (Kosturos) at 32:19-34:16 (explaining how the
Special Committee requested its cash from the AIG cash pool but was
disappointed not to receive it), 64:13-17 (the Special Committee tried
negotiating with AIG to get its cash back), 66:24-67:8 (the Special
Committee was trying to bring back as much cash as it could into FP.
See also JX-61 at 1 (08/31/2022 Minutes of Special Committee).
78
JX-52 at 3–4 (2011 Cash Pool Agreement) (“The Participants shall
jointly own, in proportion to their individual contributions, such
assets as are acquired by the CP Pool, the investment income derived
therefrom and such reinvestments as are made in the CP Pool, and shall
jointly share in the profits or losses incurred on assets invested and
reinvested in the CP Pool. . . . Any Participant may cancel its
participation or liquidate or withdraw all or part of its share of the
CP Pool at any time by giving notice of its intention in writing or by
telex to the MG Treasury Department.”). There was some evidence that
the 2011 cash pool agreement is no longer effective. See CCPX-862
(email from FP’s counsel noting that the 2011 agreement “is no longer
in effect, and the current cash pooling arrangement between [AIG] and
FP is not documented in any writing”). However, the Court discounts
that evidence in light of the fact that the Matched Funding cash pool
agreement has virtually the same terms as the 2011 agreement and was
intended to be the same as FP’s agreement. Compare JX-75 at 2–4 with
JX-52 2–4. See also JX-75 at 1 (10/19/2022 email from Stubbs to
Cosgrove confirming that the terms of the 2022 Matched Funding cash
pool agreement were “equivalent” to what was in place for FP);
04/24/2026 Tr. (Kosturos) at 80:25–81:8 (testifying that there was an
oral agreement in place between FP and AIG that mirrored the terms of
the prior agreement); 04/22/2026 Tr. (Allison) at 118:1–123:24
(testifying that the cash pool agreement between Matched Funding and
AIG was substantively the same as the cash pool agreement that had
existed between FP and AIG); 04/23/2026 Tr. (Stubbs) at 186:21–187:11
(testifying that he wanted Matched Funding to have the same cash pool
agreement as FP to ensure Matched Funding’s operational liquidity).
79
04/24/2025 Tr. (Kosturos) at 32:13-33:5 (testifying that FP
requested cash in advance of bankruptcy from the cash pool in 2022 but
was denied).
23
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 23 of 151

against the FP Revolver.
80
The Special Committee did not approve
that transaction,
81
which left FP with only $10 million in cash.
82
F.Filing of Bankruptcy Petition and Adversary Complaint
FP filed its bankruptcy petition on December 14, 2022.
83
At
that time, FP listed assets of $152 million and liabilities of
$37.9 billion.
84
On that same date, FP filed a proposed plan of
reorganization (the “Bankruptcy Plan”) and a disclosure
statement.
85
The Bankruptcy Plan proposed converting the $37.6
billion claim of AIG under the FP Revolver to equity and paying a
80
Id. at 34:17-20 (“Eventually, on the eve of filing for Chapter
11, [AIG] notified FP that they were going to offset that [$127
million] against the [FP Revolver].”), 35:3-4 (“Q. Did FP agree to
AIG’s offset of 127 million? A. No.), 71:14-17 (“Q. Okay, so you
would agree with me that on December 12th, you weren’t involved in any
discussions around the offset, correct? A. No. [AIG] unilaterally
did it. They didn’t ask.”); JX-84 (12/14/2022 email from Allison to
Filanowski regarding “AIG FP Cash Pool Balances”) (“This email will
confirm that AIG Inc. has offset the full amount of the intercompany
cash pool receivable owed by AIG Inc. to FP against the amount of the
intercompany payable owed by FP to AIG Inc. The balance in this
account as of Dec. 13, 2022 as $126,877,725.25”); JX-86 (showing a
credit on the FP Revolver of $126.8 million on 12/14/2022); 04/28/2025
Tr. (Avery) at 72:14–73:5 (testifying how JX-84 and JX-86 show the
transfer of cash from AIG to FP).
81
04/24/2025 Tr. (Kosturos) at 35:3-4 (testifying that FP did not
approve the offset); 04/28/2025 Tr. (Avery) at 164:12-21 (testifying
that AIG caused the $127 million transfer).
82
CCPX-819 at 4 (bankruptcy planning presentation stating “10M for
FP related expenses while in bankruptcy”); 04/24/2025 Tr. (Kosturos)
at 34:21–35:2 (testifying that AIG left $10 million in FP to fund the
bankruptcy).
83
D.I. 1.
84
D.I. 82 at 12 (FP’s Bankruptcy Schedules’ Summary of Assets).
85
D.I. 6 & 7.
24
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 24 of 151

pro rata distribution of $1 million to the Former Executives for
any claims they had, if their class accepted the Bankruptcy
Plan.
86
On January 13, 2023, the Former Executives filed a motion
asking the Court to dismiss the bankruptcy case or to abstain.
87

On May 10, 2023, the Court issued an opinion and order denying
the motion.
88
On February 17, 2023, FP filed a complaint against the
Former Executives (the “Complaint”).
89
AIG and the Former
Executives stipulated to AIG intervening as a plaintiff in the
adversary proceeding.
90
As relevant to the Initial Issues, Count
One of FP’s Complaint requests a declaratory judgment that FP’s
obligation to AIG under the FP Revolver is debt.
91
Count Two of
FP’s Complaint requests a declaratory judgment that the Former
Executives’ claims under various compensation plans are
subordinated to AIG’s claim arising from the FP Revolver.
92
86
D.I. 7 at 10-11.
87
D.I. 101.
88
D.I. 193 (Opinion); D.I. 194 (Order). The Former Executives
appealed the order denying the motion to dismiss or abstain, and the
District Court affirmed the Bankruptcy Court’s decision. D.I. 474.
89
Adv. D.I. 2.
90
Adv. D.I. 8.
91
Adv. D.I. 2 ¶¶ 135-38.
92
Id. ¶¶ 139-147.
25
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 25 of 151

The Former Executives filed an answer, a counterclaim
against FP and AIG, and several crossclaims against AIG.
93
The
counterclaim against FP and AIG requests a declaratory judgment
that the FP Revolver was an equity investment and not a loan.
94

Count One of the crossclaims alleges that AIG’s debt should be
equitably subordinated to the Former Executives’ claims.
95
Count
Two of the crossclaims alleges a prima facie tort against AIG.
96

Count Three of the crossclaims alleges AIG tortiously interfered
with the Former Executives’ rights under the Compensation
Plans.
97
Count Four of the crossclaims alleges that AIG is
liable as a successor of FP for its obligations under the
Compensation Plans because FP transferred all of its assets to
AIG.
98
AIG filed a motion for judgment on the pleadings and a
motion to dismiss the Former Executives’ crossclaims and
counterclaim.
99
On May 9, 2024, the Court issued an opinion and
93
Adv. D.I. 11.
94
Id. ¶¶ 184-97.
95
Id. ¶¶ 198-209.
96
Id. ¶¶ 210-14.
97
Id. ¶¶ 215-19.
98
Id. ¶¶ 220-38.
99
Adv. D.I. 33.
26
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 26 of 151

order denying AIG’s motions.
100
On August 28, 2024, after hearing argument, the Court
ordered that the issues raised in the Complaint, counterclaim,
and crossclaims be tried in two phases, with the Initial Issues
(recharacterization, equitable subordination, successor
liability, and tort claims) to be tried first.
101
On April 16,
2025, the parties submitted a joint pretrial order.
102
A trial on
the Initial Issues was held from April 21st to April 29th, and on
May 7th and 8th, 2025.
103
The parties submitted their Proposed
Findings of Fact and Conclusions of Law on June 25, 2025.
104
The
matter is ripe for decision.
III.CONCLUSIONS OF LAW
A.Recharacterization
The recharacterization doctrine is founded on the bankruptcy
courts’ equitable authority to ensure “that substance will not
give way to form, that technical considerations will not prevent
substantial justice from being done.”
105
100
Adv. D.I. 81 (Opinion); Adv. D.I. 82 (Order).
101
08/28/2024 Tr. at 47:1-48:23.
102
Adv. D.I. 169.
103
Adv. D.I. 173-74, 176-77, 179, 183-84, 186, 188, 192, 208, 212.
104
Adv. D.I. 216-17.
105
Cohen v. KB Mezzanine Fund II (In re SubMicron), 432 F.3d 448,
454 (3d Cir. 2006) (quoting Pepper v. Litton, 308 U.S. 295, 305
27
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 27 of 151

1.The Submicron Test
In determining whether a debt should be recharacterized as
equity, the Third Circuit has stated that the overarching inquiry
is “whether the parties called an instrument one thing when in
fact they intended it as something else.”
106
Whether the parties
intended an advance of funds to be debt or equity is a fact-
intensive inquiry which “may be inferred from what the parties
say in their contracts, from what they do through their actions,
and from the economic reality of the surrounding
circumstances.”
107
As a preliminary matter, it is important to note that AIG
totally controlled FP.
108
“Where, as here, the transactions occur
(1939)). See also Hartford Holdings v. Mladen (In re Eternal Enter.,
Inc.), 557 B.R. 277, 287 (Bankr. D. Conn. 2016) (“If bankruptcy courts
were bound by a party’s own characterization of its rights against a
debtor, ‘controlling equity owners of a troubled corporation could
jump the line of the bankruptcy process and thwart the company’s
outside creditors’ and investors’ priority rights.’”) (quoting Sender
v. Bronze Grp, Ltd (In re Hedged-Investments Assocs., Inc.), 380 F.3d
1292, 1298 (10th Cir. 2004)).
106
SubMicron, 432 F.3d at 456. See also Radnor Holdings Corp. v.
Tennenbaum Cap. Partners (In re Radnor Holdings Corp.), 353 B.R. 820,
838 (Bankr. D. Del. 2006) (“the overarching inquiry in a
recharacterization case is the intent of the parties at the time of
the transaction, determined not by applying any specific factor, but
through a common sense evaluation of the facts and circumstances
surrounding a transaction[.]”) (emphasis in original).
107
SubMicron, 432 F.3d at 456.
108
See supra notes 29-36 and accompanying text. AIG’s control of FP
was particularly evident in the prosecution of this adversary
proceeding. Although the Former Executives filed cross claims against
AIG, AIG did not file pre-trial or post-trial briefs on the Initial
Issues and participated in the trial only to a limited extent.
Instead, AIG relied on FP’s counsel to conduct the trial and joined in
28
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 28 of 151

between related entities rather than at arms’ length, they are
‘subject to particular scrutiny because the control element
suggests the opportunity to contrive a fictional debt.’”
109
Thus,
the Court must analyze the transaction’s objective attributes to
determine its true economic nature.
110
a.What the Parties Said
The documents and relevant correspondence called the
advances loans. The FP Revolver bears the name “Revolving Credit
Agreement” and its language includes the typical nomenclature of
loans.
111
The Promissory Note contains an unconditional promise
to repay the advances.
112
As is characteristic of debt, the FP
the briefs filed by FP in opposition to the relief requested by the
Former Executives. See, e.g., D.I. 218, D.I. 214, D.I. 213, D.I. 202,
D.I. 201, D.I. 200, D.I. 199, D.I. 198, D.I. 163. Further, FP opposed
the relief sought by the Former Executives, even when granting it
might be in the best interest of FP. For example, FP opposed the
recharacterization of the FP Revolver as equity even though it would
significantly reduce the amount of claims against the estate.
109
Geftman v. Comm’r, 154 F.3d 61, 68 (3d Cir. 1998) (emphasis
added) (quoting In re Uneco, Inc., 532 F.2d 1204, 1207 (8th Cir.
1976).
110
Cohen v. KB Mezzanine Fund II, L.P. (In re SubMicron Sys. Corp.)
291 B.R. 314, 323 (quoting Geftman, 154 F.3d at 68) (“[T]he
transaction must be scrutinized according to ‘an objective test of
economic reality’ to determine its true economic nature.”), aff’d, 432
F.3d 448 (3d Cir. 2006).
111
JX-1 at 1 (Revolving Credit Agreement) (referring to the
“revolving loan facility,” “borrowings,” and “proceeds of the loan.”);
JX-20 at 2 (Promissory Note) (identifies AIG Funding as the “lender”
and FP as the “borrower”).
112
JX-20 (“[FP] . . . unconditionally promises to pay to the order
of AIG Funding . . . in legal currency of the United States of America
and in immediately available funds, the principal sum of Sixty-Five
Billion Dollars ($65,000,000,000) or if less, the aggregate unpaid
29
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 29 of 151

Revolver and Promissory Note limited AIG’s upside to repayment of
principal and interest rather than providing an unlimited right
to share in FP’s profits.
113
Contemporaneous emails and other
documents also refer to the advances as loans.
114
The witnesses
principal amount of all loans made by [AIG Funding] to [FP] pursuant
to the [FP Revolver] dated as of September 22, 2008, between [AIG
Funding] and [FP].”).
113
JX-1 at 1; JX-20 at 1. See also 05/08/2025 Tr. (Plastino) at
102:10-12 (“Q. If you look at that document, AIG’s recovery was
capped to unpaid principal and accrued interest; correct? A. I
believe so, yes.”).
114
See, e.g., DX-529 at 2-3 (09/25/2008 email from Friedman to
Gender) (advising that a lawyer was drawing up the paperwork for,
inter alia, the FP loan and asked what interest rate should be used
for that loan); DX-32 (09/29/2008 email from Friedman) (describing all
the relevant terms of the loan from AIG to AIG Funding to FP); DX-86
at 16 (12/24/2008 email from Micottis stating “There seems to be a
great deal of confusion about how we should represent and account for
our large loan . . . . from [AIG Funding].”); DX-55 (10/03/2008 email
from Prister, at FP, to Gender, AIG’s treasurer, (requesting a
“borrow” of $1 billion); DX-87 at 2 (05/01/2009 email from Chorengal
of AIG to the Fed) (describing the intercompany advances to FP as a
loan and requesting a waiver to allow a reduction in the interest rate
that FP had to pay to AIG Funding); DX-48 at 28-31 (11/18/2008 letter
to Senator Charles E. Grassley) (attaching a chart showing “Use of
Funds Under Federal Reserve Facilities” and listing “Loans to AIGFP
for collateral postings, general investment agreements and other
maturities” totaling $43 billion”). See also JX-94 at 45 (Excerpt
from AIG’s September 30, 2008 10-Q reflecting loans to FP); JX-95 at
45 (Excerpt from AIG’s 2008 10-K reflecting loans from AIG to FP were
$46 billion at the end of 2008); DX-62 at 2 (FP’s 2008 Balance Sheet
showing $66.2 billion in intercompany loans); DX-60 at 7 (Audit
Planning Memo) (noting FP’s receipt of “significant intercompany loans
financed by [the Fed]”); DX-59 at 157 (PwC Audit Report) (defining
advances from AIG to FP as “borrowing”); DX-62 at 2 (AIG’s Financial
Products balance sheet reflecting the FP revolver in the liabilities
line as "Loans, notes, mortgages payable intercompany."); DX-38 at 3
(Minutes from the October 15, 2008, AIG board meeting) (“[B]orrowings
from the [Fed Revolver] were or will be used for a capital
contribution of approximately $1.5 billion to Nan Shan, intercompany
loans to AI Credit Corp. and [FP] to meet ordinary obligations,
maturing transactions and maturing debt, GIC terminations and
collateral calls.”) (emphasis added).
30
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 30 of 151

presented at trial consistently testified that the FP Revolver
was a loan.
115
Therefore, the Court finds that the parties “said” that the
FP Revolver was a loan, not an equity infusion. This factor is
not dispositive nor particularly helpful, however, because the
Court is charged with determining the substance rather than the
form of the parties’ transaction.
116
b.What the Parties Did
i.Use of AIG Funding to Lend
Although the loan was made to FP by AIG Funding,
117
another
115
See, e.g., 04/20/2025 Tr. (Allison) at 27:6-29:25 (testifying
that the FP Revolver is reflected as debt on FP’s financial
statements); 04/22/2025 Tr. (Gender) at 146:13-25 (“Q. Does the fact
that the signature dates on the FP revolving credit agreement and the
promissory note, does the fact that they’re in 2010, the date, change
when you believe the funding to FP actually started? A. No. I
believe it started with the effective date. Q. In September of 2008?
A. Exactly. Q. And let me just ask you: Why do you have that
understanding? . . . . A. Because I was there when we made the first
loan to FP, so I was in the room when the loan was made.”), 192:21-24
(“Prior to September 2008, funding by [AIG], to subsidiaries was
unusual for the parent company; correct? A. Not - not unusual.
There was a whole program from [AIG] Funding that loaned money to
subsidiaries.”); 04/21/2025 Tr. (Habayeb) at 70:22-71:6 (“AIG's
practice, when it lent money to its subsidiaries, it was – [with the]
exception of the insurance companies was generally in the form of a -
this intercompany facility. That was the typical practice. And
generally, the terms that were extended would be based on what [AIG
Funding] is able to get. . . . That was the general practice before
2008. And sitting here today, I continue to believe this facility was
consistent with that general practice.”).
116
SubMicron, 432 F.3d at 456 (“Form is no doubt a factor, but in
the end it is no more than an indicator of what the parties actually
intended and acted on.”).
117
04/22/2025 Tr. (Gender) at 136:12-16 (“Q. Did AIG Funding ever
make capital contributions or equity investments in any entities
within the AIG corporate entity? A. No. It was totally outside of
31
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 31 of 151

subsidiary of AIG, the Court rejects the argument that this
precludes a finding of an equity contribution. The origin of the
funding was AIG, FP’s sole shareholder, and AIG ultimately
received the repayments from FP.
118
The Court concludes that
funneling that money through another AIG subsidiary does not
change the economic reality that the funds came from AIG.
ii.Delayed Execution of Loan Documents
AIG advanced billions of dollars to FP over a two-year
period before any loan documents were signed.
119
Although the
the game plan for AIG Funding.”); 04/21/2025 Tr. (Habayeb) at 62:8-23
(“Q. You testified earlier that AIG used AIG Funding for borrowing
and as a vehicle for lending to other AIG subsidiaries. Just to be
clear, was AIG Funding used only for lending? A. It was. Q. During
your time at AIG, was [AIG Funding] ever used to make equity
investments in or contribute capital to other subsidiaries? A. I’m
not aware of any situations. The other thing, AIG Funding had no
subsidiaries. Q. And what’s the relevance of that to my questioning?
A. Because, typically, if you’re going to make a capital
contribution, it’s the parent making a capital contribution to the
subsidiary. So, AIG Funding had no subsidiaries as far as I knew.
And so it would have been [AIG] that would have made any capital
contributions.”).
118
See supra notes 24-26 and accompanying text. See also 04/21/25
Tr. (Habayeb) at 74:11-16 (“So FP needed cash to cover collateral
calls, debt maturities and transactions that are being put to them.
And they - AIG start - was advancing, had previously advanced money,
but now under the revolver was advancing more money to FP. But every
time there was excess cash in FP, it was used to repay whatever
balance was outstanding on the loan.”); DX-32 (“AIG Funding will pay
interest on its loans from [AIG] cost + 18bps (which rate shall reset
monthly on the first day of each month). AIG Funding will charge [FP]
at the same interest rate as above. When [FP] repays on its
intercompany loan (including monthly interest), the repayment will go
to [AIG Funding] and in turn the latter will repay [AIG].”).
119
JX-86 (schedule of borrowings and payments under the FP Revolver
maintained by AIG’s Treasury Department); JX-1 (FP Revolver) (dated as
of September 22, 2008, but signed on October 28, 2010); JX-20
(Promissory Note) (same).
32
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 32 of 151

evidence shows that the parties started drafting loan documents
in 2008, the FP Revolver and Promissory Notes were not executed
until two years later, in October 2010.
120
Furthermore, there is
no evidence that FP’s Board of Directors ever approved the loan,
even though the FP Revolver required that it do so.
121
iii.Due Diligence and Negotiations
In addition, AIG did not act as a creditor normally would.
It did no due diligence or credit analysis of FP before advancing
any funds or executing the loan documents.
122
Because AIG
120
See, e.g., DX-529 at 2-3 (09/25/2008 email from Friedman to
Gender) (“Aaron is drawing up the loan agreements, starting with
ILFC.”); 04/22/2025 Tr. (Gender) at 149:5-8 (“Q. Okay. And do you
see where Mr. Friedman notes that “Aaron is drawing up the loan
agreements”? First of all, do you know who Aaron is? A. I’m
assuming he’s a lawyer in the group.”), 149:25-150:4 (“These are the
intercompany loan agreements that were kind of established [the week
of September 22, 2008]. Q. Okay. And which intercompany loan
agreements? A. They were to several. One was ILFC. One was FP.
And one was - it was another entity, AGFC, I think. Q. Okay. And
when you refer to “FP,” you’re talking about the FP revolver? A.
Correct.”); JX-1 at 5-6 (signed October 28 and 29, 2010); JX-20 at 2
(signed October 28, 2010).
121
05/07/2025 Tr. (Plastino) at 29:20-22 (“Q. Did you see in your
review of material any board resolution of AIG FP authorizing [the FP
Revolver]? A. I did not.”); JX-1 § 2.1 (“The obligation of AIG
Funding to make any loan is conditional upon receipt by AIG Funding of
. . . (ii) certified copies of Resolutions of Borrower’s Board of
Directors authorizing the execution and delivery by it of this
Agreement and the Note and the incurrence and repayment of the
obligations thereunder.”).
122
04/22/2025 Tr. (Gender) at 189:21–192:15 (“Q. [T]reasury entered
into transactions with subsidiaries on a non-arm’s length basis. Is
that what I’m hearing? A. Exactly. I mean - exactly, because they
were subsidiaries. They were hundred percent owned subsidiary. . . .
We did not do - when we provided intercompany loans, treasury did not
do any credit analysis of our subsidiaries. . . . Q. Treasury did
not take into consideration the health of the balance sheet of the sub
when deciding, from the treasury perspective, whether to write an
intercompany loan. Fair? A. Again, we did not do a formal credit
33
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 33 of 151

controlled FP, FP had no ability to negotiate the terms of the FP
Revolver.
123
Instead, the terms were dictated by AIG.
124
Although AIG unilaterally drafted the loan documents, it
failed to include normal credit terms, such as a payment schedule
or a fixed end date.
125
AIG did not insist on any security for
its advances
126
and had no expectation that it would be repaid by
FP for the funds it advanced.
127
analysis of our subsidiaries before we provided intercompany loan. It
was more of a business discussion between the management of the
subsidiary and the holding company.).
123
See supra note 61 and accompanying text.
124
Id.
125
See infra notes 158-61 and accompanying text. See also JX-1; JX-
86.
126
See infra notes 197-98 and accompanying text.
127
4/21/25 Tr. (Habayeb) at 189:10-19 (“A. So we expected some
recovery. I don’t know if it’s - you don’t know if it’s going to be
100 percent. It became clear over time it’s going not going to be 100
percent, but you still expect to get some recovery. . . . . Q. In
2010 there was a very low probability that AIG could recover the
entire principal of this so-called loan; correct? A. Correct. The
question is how much could AIG get.”); 08/19/2022 Balfan Dep. at
289:11-17 (“Q. Well, was there any reasonable expectation that FP
would ever pay off that $35 billion? A. Probably not. I can’t put
myself in the minds of other people. But in my opinion, almost
impossible to pay off that debt.”); 04/22/2025 Tr. (Allison) at 61:6–9
(“Q. And you’re not aware of [AIG] ever putting pressure on FP to
repay the [FP Revolver]? A. I have not felt pressured by [AIG] to
repay the [FP Revolver].”); 04/25/2025 Tr. (Liebergall) at 115:8–10
(Q. Did you ever feel any pressure from the parent to pay interest?
A. No.”); 07/07/2022 Herzog Dep. at 207:7-15 (“Q. At that point in
time, did you give any consideration to whether FP would be able to
pay off its debt to AIG? A. I did not. Q. Did you care one way or
the other? A. I don’t recall caring or not caring. I just don’t
recall giving much thought to it.”); 01/23/2024 Gender Dep. at 185:16-
186:8 (“Q. I want to know whether or not AIG FP could ever repay
these amounts. That was something that you as treasurer - that was
fully within purview. A. I guess it would be if that was meaningful
34
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 34 of 151

iv.Recapitalization Plans
The Court finds that AIG divulged its true intent in funding
FP when it sought to convert the vast majority of the outstanding
balance of the FP Revolver into equity. In 2010, before any loan
documents were even executed
128
and shortly before AIG repaid the
Fed loan,
129
AIG proposed converting $35 billion of the loan to
equity, offsetting $18.5 billion against a tax receivable AIG
owed to FP, and leaving only a balance of $2 billion as a loan.
130

AIG stated that the purpose of the recapitalization plan was to
help AIG repay its Fed loan and to improve FP’s earnings by
reducing substantially its borrowing and interest expense.
131
AIG
information. Q. Well, when you say ‘meaningful,’ what could be more
meaningful? A. Well, [FP], was a 100-percent-owned subsidiary of
AIG. Q. Okay. So what’s significant about that? A. Essentially
it’s –it’s intercompany transactions so it’s eliminated in the
consolidation process.”).
128
See, e.g., JX-1 at 5-6 (signed October 28 and 29, 2010; JX-20 at
2 (signed October 28, 2010).
129
DX-26 at 17 (“Maturity Date” shall mean September 22, 2010);
CCPX-669 at 11 (summary from the Congressional Research Service
stating that AIG repaid the Fed Revolver in January 2011).
130
JX-13 at 3; JX-15 at 3.
131
Id. (08/30/2010 email from Chorengel of AIG to the Fed)
(requesting authority to recapitalize FP’s outstanding loan balance
“to correctly reflect the amount collectible from [FP]” by
“eliminat[ing] the negative equity in [FP].”); CCPX-428 at 1
(07/22/2010 email from Reilly to Blake) (“By the end of the third
quarter [AIG] will be re-capitalizing [FP]. By doing this we will be
substantially lowering the Fed loan outstanding and thus the
associated interest expense. This would improve quarterly earnings at
[FP] by $400-500M a quarter. Want to make see [sic] if we need to be
concerned with regard to the deferred comp calculation.”). See
generally JX-86 (reflecting median interest per quarter of $501
million on the FP Revolver).
35
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 35 of 151

abandoned the recapitalization plan only after its outside
counsel advised that restoring FP to financial health might
obligate FP to restore the Former Executives’ account balances
under the Compensation Plans.
132
Ultimately, AIG paid off the Fed Revolver in January 2011
133
and set off the FP tax receivable against the FP Revolver in
March 2011.
134
In June 2011, FP stopped making cash payments of
interest on the FP Revolver and began paying the interest in kind
(by adding it to the principal balance of the loan).
135
132
JX-14 at 2 (“If the proposed recapitalization substitutes equity
for debt, thereby creating a solvent FP with assets that could fund a
restoration plan, there is a significant risk that at some point prior
to the expiration of the limitations period, FP will face breach of
contract litigation demanding compliance with the restoration plan
obligation. As this would represent a potential $600 million
liability of the worst sort (since the Company has assured multiple
constituencies that these bonus obligations have been completely
extinguished), it seems worthwhile to ask if financial statement
simplification is worth this risk.”); id. at 1 (09/02/2010 email from
Herzog to Reilly and Gender) (“I don’t care how its driven, we’re not
paying the deferred comp. We’ll reverse / rescind the capital
contribution before we pay deferred comp. Nothing should be done until
this is resolved. NO entries.”); CCPX-451 at 2 (“Clearly, there should
be no effect on the comp plans, one way or another. Under no
circumstances should we restore benefits under any plan. After the
recap there will still be several billion dollars of intercompany debt
at FP”); 04/23/2025 Tr. (Herzog) at 52:12-15 (“Q. Did AIG ultimately
go forward with the full proposed recapitalization that was described
in the waiver request we just looked at? A. We did not.”).
133
See CCPX-669 at 11.
134
See JX-86 at 5 (showing $18 billion credit applied to the FP
Revolver on 03/15/2011).
135
04/22/2025 Tr. (Allison) at 19:11-13 (“Q. How often would you
say FP made repayments? A. Pardon me, FP made repayments frequently,
up until the end of 2011, and then there were more intermittent.”);
JX-86 (showing cash interest payments through May 2011 totaling $6.1
billion and paid in kind interest accruing from June 2011 until FP
filed for bankruptcy in December 2022 totaling $5 billion).
36
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 36 of 151

After abandoning the recapitalization plan, AIG finally
papered the FP Revolver as a debt.
136
Interestingly, AIG was
entertaining the recapitalization plan at the same time that it
was considering an intercompany loan policy that would have
mandated treating the FP Revolver as equity instead of debt.
137
AIG’s view of the transaction as equity rather than debt is
also evidenced by the Bankruptcy Plan that FP filed on December
14, 2022.
138
That Plan, filed with AIG’s support,
139
proposes
allowing AIG to retain its equity in FP in satisfaction of the
amounts due under the FP Revolver.
140
136
Compare JX-14 with JX-1 (FP Revolver signed 10/29/2010) and JX-20
(Promissory Note signed 10/29/2010).
137
JX-16 at 4 (09/07/2010 email from Bhandari to Reilly and Hallman
with a presentation on “Project LAIR”) (“Transactions between
affiliated entities should be entered into as if between unrelated
parties (i.e. on an ‘arm’s length’ basis). Therefore exposure to
credit risk, covenants, pricing and modifications must be assessed
based on the debtor’s financial position, taking into consideration
the health of its balance sheet, income statement, cash flows,
business plan, budgets, forecasts and conditions in the market at the
time of the loan,” and “Equity injections may be made if market
conditions/leverage of the subsidiary does not justify debt.”).
138
D.I. 6.
139
See, e.g., D.I. 2 at ¶ 65 (Kosturos’s First Day Declaration);
D.I. 6 at 20, 37, 51 (“This Plan is the product of extensive
discussions and negotiations between and among, inter alia, the
Debtor, the Parent, and their respective professionals.”).
140
D.I. 7 at 28 (FP’s Disclosure Statement) (“[AIG] as the sole
Holder of the Allowed Class 4 Prepetition Revolving Loan Claim, will
retain the Existing [FP] Interests in exchange for, and in full
satisfaction, settlement, discharge and release of, such Allowed Class
4 Claim.”).
37
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 37 of 151

c.Economic Reality
As noted above, the parties in their contracts and other
documents have called the FP Revolver a loan.
141
The Court
concludes, however, that this nomenclature does not reflect the
reality of the transaction. In 2008, the terms of the loan AIG
obtained from the Fed prohibited equity contributions from AIG to
its subsidiaries, without the Fed’s consent.
142
Given the
political climate at the time of the 2008 financial crisis,
143
and
141
See supra notes 111-15 and accompanying text.
142
DX-26 § 6.04(a) (“[U]nless the [Fed] shall otherwise consent in
writing, [AIG] will not, nor will it cause or permit any [non-
insurance subsidiary with more than $50 million in assets] to . . . .
Purchase, hold or acquire any Equity Interests, evidences of
indebtedness or other securities of, make or permit to exist any loans
or advances to, or make or permit to exist any investment or any other
interest in, any other Person, except: (i) investments by [AIG] and
the Subsidiaries existing on the date hereof in the Equity Interests
of the Subsidiaries, and (ii) additional investments by [AIG] and the
Subsidiaries in the Equity Interests of the Subsidiaries . . .
provided that . . . (B) investments made after the Closing Date by
[AIG] . . . shall only be permitted (x) pursuant to funding
commitments in effect on, and disclosed to the [Fed] on or prior to,
the Closing Date or (y) with the prior written consent of the
[Fed].”). See also 04/23/2025 Tr. (Herzog) at 48:17-20 (“[AIG]
couldn’t do activities like [recapitalize FP] without [the Fed’s]
approval or knowing that they wouldn’t object to it.”).
143
See, e.g., DX-48 at 15 (10/10/2008 press release quoting Sen.
Grassley) (“Sen. Chuck Grassley, ranking member of the Committee on
Finance, is urging the government to rein in the executive
compensation, travel, and other expenses of the companies and banks
that are getting financial aid, stating that ‘Treasury. . . will have
to verify for us that tax dollars intended to help stabilize the
economy aren't wasted on expensive corporate retreats and big
executive paydays, adding insult to injury. Treasury indicated in its
announcement today that it will apply stricter limits on compensation
in individual bank rescues. While this provides some comfort, it
doesn't address the other ways taxpayers can get ripped off.
Corporate executives can be endlessly creative about feathering their
own nests. Treasury has to be many steps ahead.’”).
38
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 38 of 151

AIG’s need for approval of a loan for itself from the Fed, the
Court concludes that AIG had to call its advances to FP a loan
even though it considered them an equity infusion.
The economics of the transaction also provide evidence that
the advances were not loans. AIG did no due diligence and knew
that FP was not in a position to repay the loan,
144
because it
faced enormous losses on its derivative contracts.
145
AIG took no
security and had no assured source of repayment of the
advances.
146
While FP did make some payments of interest and
sporadic payments of principal, it was often from cash realized
by exiting its derivative contracts or from borrowings under the
FP Revolver.
147
The parties only papered the transaction as a
144
See supra note 122 and accompanying text.
145
See supra notes 16-20 and accompanying text.
146
See infra notes 197-198 and accompanying text.
147
See, e.g., 04/21/2025 Tr. (Allison) at 24:20-25:9 (“Q. So where
did FP obtain the funds it used to make principal and interest
payments on the revolver? A. From unwinding its positions. Q. And
how did unwinding positions generate cash to make payments? A. Well,
if you - when you unwound a position, if it had been a position that
you had to post collateral on, you would receive back the collateral
and then you could sell that and use those funds to pay down the loan
or if you had a spread that you’d earned unwinding the liability,
unwinding whatever asset was associated with it, you may have made
money on that too. And you may have - when you generated the cash
from that transaction, that excess cash would be used to pay down the
line.”); 04/25/2025 Tr. (Liebergall) at 84:17-25 (“Q. Okay. Now,
once this borrowing started in September of 2008 from AIG to FP, FP
actually made numerous interest payments in connection with the
borrowing; correct? A. Again, they were interest payments made,
funded by themselves. So, as I mentioned to you earlier, when we’d
have a cash need, in that circumstance, AIG, we would effectively ask
them for money to give them money. So, the net impact - but that is
what they called it at that time, yes.”).
39
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 39 of 151

loan two years later
148
after AIG realized that its plan to treat
the advances as equity would require FP to honor its obligations
to the Former Executives under the Compensation Plan.
149
Although
AIG’s witnesses testified at trial that the advances were loans,
AIG’s CFO Herzog previously admitted that the labels did not
really matter.
150
Viewing the parties’ actions and the objective
148
JX-1 at 5 (executed on October 28 and 29, 2010); JX-20 (executed
on October 28, 2010). See also 04/22/2025 Tr. (Gender) at 145:21-23
(“Q. Do you have any idea why the FP revolving credit agreement and
promissory note are dated effective as of September 2008 but not
signed until 2010?), 146:6 (“A. No, I don’t know.”); 04/21/2025 Tr.
(Habayeb) at 71:8-10 (“Q. Are you aware that the FP revolver was not
signed until 2010? A. I was not. But, you know, it’s an
intercompany loan.”). See, e.g., Roth Steel Tube Co. v. Comm’r, 800
F.2d 625, 631 (6th Cir. 1986) (noting that certain advances which were
not evidenced by notes or other instruments of indebtedness or
recorded as loans on accounting records provided “little if any
support of a finding of bona fide debt.”).
149
See supra notes 59-60, 132 and accompanying text.
150
06/11/2012 Herzog Dep. at 429:4-430:10 (“Q. In that case, Mr.
Herzog, tell me what the factors were that – as far as you understand,
led the company to decide to extend the funding to FP in the third
quarter in the form of a loan, as distinguished from, in whole or in
part, as capital? A. My recollection for the rationale for a loan
versus capital, which we could have just as easily made some of all of
it equity, so, it – again, there’s no — there’s - there’s nothing
complicated about was it loaned [sic] – you know, cash goes in, and as
either you account for it as an equity contribution [sic], which you
could just as easily put it in as a loan and made a – and we’ve done
this from time to time – made non-cash equity contributions in the way
of loan forgiveness. And we’ve done that from time to time throughout
the company. And so, I think the - if I recall specifically, we were –
we were focused on should there be cash generated inside [FP]. The
easiest way to get that cash out of [FP] to the parent was in the form
of – of “normal course” interest payments. So, you put an interest
charge on the loan, and to the extent there’s cash inside [FP], they
pay the intercompany interest, and it just makes it mechanically and
ministerially easier.”). See also 05/07/2025 Tr. (Plastino) at 42:6-
43:5 (“And so I looked to the testimony of Mr. Herzog, for example.
And he said, ‘I don’t recall, sitting here today, or even have a vague
recollection of giving much consideration to whether it was going to
get paid back or not.’ So that answers the question as to ability to
40
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 40 of 151

economic reality of the transaction between AIG and FP in 2008
under the Third Circuit’s SubMicron test, the Court concludes
that the FP Revolver was an equity infusion.
151
2.The Autostyle Test
Although the Third Circuit has eschewed a “mechanistic
scorecard,”
152
many courts use multi-factor tests to evaluate the
true nature of a transaction. If the Court were to apply the
multi-factor test developed by the Sixth Circuit in the Autostyle
case,
153
it would confirm the Court’s conclusion that the advances
pay. There wasn’t - or at least he did not give consideration to that
point. And he reaffirmed that in the - in his testimony. You can see
that in the second red box where he was asked whether he gave any
consideration to whether FP would be able to pay off its debt to AIG.
And he said, ‘I did not.’ He’s actually being read his testimony.
And then in terms of how the transaction was structured, one of his
answers says, ‘I don’t recall the specifics, other than ministerially
being easier to get cash out of FP to the holding company by way of
normal intercompany interest payments and/or debt payments.’ And he
goes on to say that it really didn’t because it all comes out in
consolidation anyway, presumably the consolidation of the financial
statements. So this is something that he certainly did not focus on.
And to the extent he focused on it, he was looking at what he terms
‘ministerial ease’ rather than the fundamental economic substance of
the advances.”).
151
SubMicron, 432 F.3d at 456 (“the characterization as debt or
equity is a court’s attempt to discern whether the parties called an
instrument one thing when in fact they intended it as something else.
That intent may be inferred from what the parties say in their
contracts, from what they do through their actions, and from the
economic reality of the surrounding circumstances.”).
152
Id.
153
Bayer Corp. v. MascoTech, Inc. (In re AutoStyle Plastics, Inc.),
269 F.3d 726, 749–50 (6th Cir. 2001) (creating an eleven factor test:
“(1) the names given to the instruments, if any, evidencing the
indebtedness; (2) the presence or absence of a fixed maturity date and
schedule of payments; (3) the presence or absence of a fixed rate of
interest and interest payments; (4) the source of repayments; (5) the
adequacy or inadequacy of capitalization; (6) the identity of interest
41
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 41 of 151

made by AIG to FP were equity and not debt.
The Court’s analysis of these factors and the evidence on
which it is based is detailed below,
154
but the Court summarizes
its conclusions here.
Most of the factors imply that the advances were equity
contributions: (i) there was no source from which FP could repay
the loan and, in fact, AIG had no expectation it would be repaid;
(ii) FP was not adequately capitalized at the time of the
advances; (iii) there was a complete overlap of identity of
interest between the creditor and stockholder because AIG was
FP’s sole shareholder and only lender; (iv) there was no security
for the advances; (v) the advances were effectively subordinated
to claims of other creditors (except the Former Executives)
because AIG had guaranteed third party claims; and (vi) there was
no sinking fund to repay the advances. Other factors were
neutral under the circumstances of this case: (i) there was no
fixed maturity date or schedule of repayment of the principal,
though that is not unusual with revolving credit; (ii) interest
was required to be paid but was paid from borrowings or was paid
between the creditor and the stockholder; (7) the security, if any,
for the advances; (8) the corporation’s ability to obtain financing
from outside lending institutions; (9) the extent to which the
advances were subordinated to the claims of outside creditors; (10)
the extent to which the advances were used to acquire capital assets;
and (11) the presence or absence of a sinking fund to provide
repayments.”).
154
See infra notes 155-254 and accompanying text.
42
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 42 of 151

in kind; (iii) FP had no ability to obtain a loan from a third
party, but no one else could either at the time because of the
financial crisis; and (iv) the advances were not used for capital
assets or for business operations. Only one of the factors
unqualifiedly suggests that the advances were a loan: the name
given to the advances was consistent with a loan not equity.
a.Names Given to the Instruments
As the Court discussed above, the FP Revolver bears the name
“Revolving Credit Agreement” and its language is typical of loan
documentation.
155
The Promissory Note and other contemporaneous
documents and communications also consistently refer to the
advances as loans.
156
Therefore, the Court must conclude that the first factor,
the names used in the documents, suggests that the FP Revolver
was a loan rather than an equity contribution.
b.Fixed Maturity Date and Schedule of Payments
“The absence of a fixed maturity date and a fixed obligation
to repay is an indication that the advances were capital
contributions and not loans.”
157
155
JX-1.
156
See supra notes 111-15 and accompanying text.
157
Autostyle, 269 F.3d at 750. See also Friedman’s Liquidating
Trust v. Goldman Sachs Credit Partners, L.P. (In re Friedman’s Inc.),
452 B.R. 512, 520 (Bankr. D. Del. 2011).
43
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 43 of 151

In this case, the FP Revolver had a two-year term that
renewed automatically unless AIG Funding and FP agreed in writing
to terminate the FP Revolver.
158
FP had the ability to terminate
the FP Revolver at any time on 30 days’ notice, but AIG Funding
could not terminate the FP Revolver unless FP defaulted, became
insolvent, or filed for bankruptcy.
159
Because FP had the ability
to extend the maturity of the FP Revolver indefinitely, the Court
finds that the FP Revolver had no fixed maturity date.
The FP Revolver also had no fixed schedule for repayment of
principal, instead it provided that “[FP] shall have the right to
repay the principal amount of the loans made by AIG Funding
hereunder, in whole at any time or in part from time to time,
without premium or penalty.”
160
While the Promissory Note did
contain an unconditional promise to pay the principal, it also
had no required payment date(s) and contained the same proviso
that FP could repay the principal whenever it wanted.
161
FP asserted that the Promissory Note had a schedule for
repayment of the loan, but that schedule was prepared in 2010 and
simply includes the actual payments of principal made by FP
between September 2008 and October 29, 2010, when the Note was
158
JX-1 § 1.6(a). This is in contrast to the Fed Revolver which had
a fixed maturity date of September 22, 2010. DX-26 at 17.
159
Id. § 1.6(b).
160
Id. § 1.4.
161
JX-20 at 1.
44
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 44 of 151

executed.
162
It did not have a schedule for required future
payments of principal. Further, the parties’ records show that
FP was not adhering to any identifiable schedule for repaying
principal.
163
Instead, whenever FP had excess cash, FP sent the
cash back to AIG.
164
Therefore, the Court concludes that FP had
no obligation to comply with a schedule of repayments under the
FP Revolver or the Promissory Note.
165
The Former Executives’ expert witness opined that the FP
Revolver’s lack of a maturity date and schedule for repayment of
the principal were hallmarks of equity infusions where “the
company gets to determine when and if to pay dividends and return
capital to its shareholders.”
166
162
Id. Schedule 1. Cf. JX-86 (schedule of payments from 2008
through 2024 maintained by AIG’s Treasury Department).
163
See JX-20 & JX-86.
164
04/22/2025 Tr. (Allison) at 19:17-19 (“Q. What generally would
trigger FP to make a repayment? A. When FP had excess cash, right,
it would repay the line.”); 4/21/25 Tr. (Habayeb) 74:11-16 at
(testifying that “FP needed cash to cover collateral calls, debt
maturities and transactions that are being put to them. And . . . AIG
. . . was advancing, had previously advanced money, but now under the
revolver was advancing more money to FP. But every time there was
excess cash in FP, it was used to repay whatever balance was
outstanding on the loan.”).
165
See 4/22/25 Tr. (Gender) at 142:22-43:1 (“Q. And is there a
fixed maturity date specified in here? A. No. Again, these were
ongoing revolvers. They were supposed to be short-term loans
originally. Q. Is there a fixed repayment schedule anywhere in here?
A. No.”).
166
05/07/2025 Tr. (Plastino) at 28:12-16 (“As I said, this is more
consistent with how you would think about equity funding than with
debt because in the case of equity funding, the company gets to
determine when and if to pay dividends and return capital to its
45
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 45 of 151

FP’s expert admitted that the FP Revolver lacked a fixed
maturity date and repayment schedule,
167
but testified that
revolving credit agreements typically do not have those terms
shareholders.”), 32:1–33:1 (“Q. Did you also hear, in words or
substance, the term ‘capitalization’ or a switch to ‘capitalizing
interest’ in the context of your review of this matter? A. Yes. Q.
And can you explain to the Court your analysis of that. A. Right.
So it’s my understanding that, at a certain point, AIG began
capitalizing interest on the advances. So in other words, instead of
paying it in cash or drawing down cash and using that to pay, they
added the – the interest due to the outstanding balance of the
advances, and this continued for a number of years. Q. Did your
assessment of whether there was a maturity date impact your analysis
of interest, either the capitalized or noncapitalized assertions of
interest payments? A. Yes. So the ability and the practice of
capitalizing interest when you have an instrument that effectively, as
we discussed before, has no maturity date means that this arrangement
can continue for an extended period of time with – with – with no
trigger in order to cause AIG FP to return capital to [AIG] Funding
and, thereby, to AIG. Q. And how, from an economic standpoint, did
that factor into your analysis? A. This is a provision, again,
where, effectively, the borrower gets to decide when to return capital
to the provider of capital is more consistent with - it is consistent
with equity rather than debt.”). See also 04/21/25 Tr. (Habayeb) at
62:24–63:11 (“Q. . . . [I]n your view, how is a loan different from a
capital contribution? A. So with a loan, you know, there’s an
expectation you get repaid and you charge interest for it. And you’re
higher up in the capital structure on the borrower end. In a capital
contribution, you make an equity infusion. There’s no interest being
collected. There’s no maturity date on when you expect to get it
back. And you’re lower in the capital structure, so you’re in a loss-
absorbing mode, while with the loan, you should be - have less
exposure to losses than equity. And it depends, then, on the
performance of the subsidiary whether you get dividends or not.”)
(emphasis added); 05/07/2025 Tr. (Plastino) at 28:1-10 (“So taken
together with the previous clause that we looked at which talks about
automatic renewal, this really puts the power in the hands of the
borrower, the recipient of capital, to determine when to return that
capital to the lender. I have on occasion seen loans that flip this
on its head, so-called demand notes, where the provider of capital can
demand that back upon written notice when they chose. I’ve not seen
anything termed or considered to be debt where the return of capital
is at the discretion of the borrower.”).
167
01/23/2025 Imburgia Dep. at 198:17-21 (“It has a term. It
doesn’t have a fixed, ultimate payment date because it’s a revolver.
And this is a revolver issued by a parent company that owns a 100
percent of the equity.”).
46
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 46 of 151

because borrowers draw on and repay a revolving credit line as
needed, not on specified dates.
168
He opined that this is
particularly true for intercompany revolvers because the parent
can make the subsidiary repay the loan at any time.
169
Notwithstanding the lack of a maturity date and payment
schedule, FP notes that it made 170 separate repayments under the
FP Revolver between 2008 and 2022 in the aggregate amount of
$65.5 billion, of which $59.4 billion was applied as principal
168
05/08/2025 Tr. at 40:23-41:9 (Imburgia) (“Q. How about revolving
lines of credit, in particular? Are fixed repayment schedules
characteristic of revolving lines of credit, even outside of the
intercompany context? A. No. Typically, the revolvers are basically
providing an entity with cash flow based on - on the needs. It
usually has a total amount in it that the revolver can go up to, but
it - it basically is a revolver, so it’s money going in and money
coming out. So that money coming in and money coming out is based on
needs; it’s not based on a schedule. Q. So were you surprised that
there was no fixed repayment schedule specified in the revolving
credit agreement? A. No.”). See also 4/24/25 Tr. (Kosturos) at
14:6-14 (“Number two, the term was for an initial two years and then
after that it effectively evergreened. So every year, it rolled over
as long as both parties agreed to, so that term was extended. And
lastly, as it relates to pay downs on the debt, a revolver doesn’t
have pay downs. It is literally a facility that has borrowings and
repayments on a basis as needed or as possible when they can make
those payments. There’s no fixed payment schedule. That would be a
definition of a term debt.”); 04/21/2025 Tr. (Habayeb) at 64:24-65:2
(“A revolving credit agreement is where a lender agrees to lend you
money up to a certain amount, but it’s not drawn necessarily on day
one. You’re able to draw on it over time as needed.”). See JX-1 §
1.1 (allowing borrowings up to $65 billion).
169
05/08/2025 Tr. (Imburgia) at 40:13-19 (“Q. And more generally in
your experience, is it actually typical that intercompany revolvers
lack a fixed maturity date? A. Yes. And it’s principally because,
if the parent company is the hundred percent owner of the subsidiary,
they could direct the subsidiary to pay down the loan at any point.”).
47
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 47 of 151

repayments even though FP never became profitable again.
170
FP
argues that “[c]ourts do not require perfect documentation to
evidence an intent to create a debt.”
171
The Court agrees that perfect documentation is not required
and that the lack of a maturity date and schedule of payments is
just one factor to consider in determining whether the parties
intended a debt or equity investment.
172
The Court also agrees that revolving credit agreements often
“roll-over” (i.e., extend the maturity date) as long as the
borrower is not in default. However, it is usually the lender,
not the borrower who determines if the loan maturity should be
170
See JX-86; 04/22/2025 Tr. (Allison) at 20:10-14 (“Q. And has FP
ever recouped all the losses it suffered in the 2008 financial crisis?
A. No. Q. Has FP repaid portions of the revolver despite that? A.
Yes.”).
171
See Official Comm. of Unsecured Creditors of HH Liquidation, LLC
v. Comvest Grp. Holdings (In re HH Liquidation), 590 B.R. 211, 292
(Bankr. D. Del. 2018). See also Joseph v. Feit (In re Liberty Brands,
LLC), No. 07-10645 (MFW), 2014 WL 4792053, at *5 (Bankr. D. Del. Sept.
25, 2014) (holding that the transaction at issue was a loan even
though the loan was undocumented at the time it was made because the
loan was documented a short time after and included a definite
maturity date and specific interest rate); Lamonica v. Tilton (In re
Transcare Corp.), No. 16-10407 (SMB), 2020 WL 8021060, at *37 (Bankr.
S.D.N.Y. July 6, 2020) (declining to recharacterize an insider’s debt
even though no loan agreement existed at all and stating that “[t]here
was no time to draft a loan agreement even if anyone had thought about
it”).
172
See, e.g., State St. Bank, 520 B.R. at 76 (finding that the
creditor’s decision not to collect the loan at maturity was not
evidence of an equity contribution because the creditor did not want
to force a value-destructive liquidation); Liberty Brands, 2014 WL
4792053, at *3–4 (finding that the borrower made regular payments even
though there was no fixed schedule of payments and ultimately repaid
the loan in full).
48
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 48 of 151

extended.
173
Further, while revolvers do not typically include a
schedule of repayments (because they are based on a company’s
cash needs and ability to repay), revolving loans at least
require repayment of the full principal on the maturity date.
174

There is no such requirement in the FP Revolver.
175
FP asserted that there was no fixed maturity date because
the parties did not know how long the financial crisis or the
winddown of FP would last but knew it would take years.
176
The
173
See State St. Bank, 520 B.R. at 76. See also 05/07/2025 Tr.
(Plastino) at 27:15-18 (“This type of arrangement where a party -
where the recipient of capital gets to effectively choose when to
return that capital to the provider is more consistent with an equity
investment than with a debt investment.”).
174
05/08/2025 Tr. (Imburgia) at 41:1-6 (“Typically, the revolvers
are basically providing an entity with cash flow based on - on the
needs. It usually has a total amount in it that the revolver can go
up to, but it - it basically is a revolver, so it’s money going in and
money coming out. So that money coming in and money coming out is
based on needs; it’s not based on a schedule.”). But see 05/07/2025
Tr. (Plastino) at 27:12-14 (“If you’re modeling this as debt, you need
to be able to model the payoff date. And this makes it impossible for
you to do that.”), 28:1-5 (“Right. So taken together with the
previous clause that we looked at which talks about automatic renewal,
this really puts the power in the hands of the borrower, the recipient
of capital, to determine when to return that capital to the lender.”),
104:20-25 (“In - you would run into issues if you kept extending a
maturity date ad infinitum, because then the real question is whether
there’s actually a defined obligation to pay. There are companies
that I’ve worked with that have run into issues with the IRS, with
their auditors, because they did exactly that.”), 32:23-33:1 (“This is
a provision, again, where, effectively, the borrower gets to decide
when to return capital to the provider of capital is more consistent
with - it is consistent with equity rather than debt.”).
175
JX-1.
176
See 04/21/2025 Tr. (Habayeb) at 94:10-22 (“Q. Based on your role
at AIG and involvement in the wind-down, how long was the wind-down
expected to take? A. It was expected to take a number of years to
get there. We knew there would be some things that we would be able
to do quickly. There would be things we’ll take some time to unwind.
49
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 49 of 151

Court rejects this argument for several reasons. First, the
crisis may have excused the execution of formal documentation in
2008 but by 2010 the financial crisis had abated enough that the
parties were able to execute appropriate documents. Nonetheless,
AIG failed to include a maturity date or fixed schedule for
repayment of the FP Revolver in those documents.
Further, while FP asserts that the loan documents were
boilerplate and used historically,
177
there is conflicting
And some things you will just keep on the books and let them run their
natural course. Q. And why for those things was it better to keep
them on the books and let them run their natural course? A. There
was a trade-off on how do you maximize value while managing the risk
profile. So if you want to try to get something up quickly, you’ll be
leaving - you get less value in exchange for it.”); 05/08/2025 Tr.
(Imburgia) at 40:4-12 (“I believe that it would probably be illogical
to have a fixed maturity date because some - some of these derivative
transactions go out 10 and 20 years. So, if it did have a maturity
date, it would then have to be redone and - and issued a new document.
So it makes sense, because of the long period, to have it be a
revolver that gave the parties the ability to fund the - the needs of
the entity and gave the underlying entity the flexibility to funnel up
money when it had excess cash.”).
177
4/21/2025 Tr. (Habayeb) at 184:18-22 (“Q. And unlike third-party
debt, the funding arrangement between FP and AIG had no maturity date,
correct? A. I don’t think it did, but I’m not 100 percent certain.
The intercompany facilities we have, I don’t think had maturity
dates.”), 186:2-3 (“Based on this, it didn’t have a maturity date,
which doesn’t surprise me because this is all intercompany debt.”);
04/22/2025 Tr. (Gender) at 143:10-20 (“Q. And it states that: ‘The
revolver will terminate in the event of any insolvency or bankruptcy
of the borrower at which point all outstanding indebtedness under the
revolver would be immediately due and payable.’ Do you see that? A.
Yes. Q. And was that also a standard provision? A. It was
essentially just a boilerplate. Q. In all of the intercompany loan
agreements at AIG? A. Yes.), 143:2-5 (“Q. And I take it from your
answer it was standard for there not to be a fixed maturity date or a
fixed payment schedule in the intercompany loan agreements at AIG? A.
Exactly.”). See also 04/21/2025 Tr. (Habayeb) at 70:16-71:6 (“Q. Was
the FP revolver consistent or inconsistent with AIG’s practice of
lending money to the noninsurance intercompany subsidiaries? A. So
FP’s practice - sorry. AIG’s practice, when it lent money to its
50
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 50 of 151

testimony on this point.
178
The Court finds it unnecessary to
resolve that conflict, however, because it finds that even if the
loan documents were boilerplate, it does not justify the absence
of customary loan terms in the FP Revolver. Coincidentally, at
the time the FP Revolver was executed, AIG was examining its
historical practice of making loans to its subsidiaries and
drafting a policy of best practices, suggesting that it believed
the historical practice needed to be improved.
179
While some courts have held that the lack of a fixed
maturity date and repayment schedule indicates equity rather than
subsidiaries, it was - exception of the insurance companies was
generally in the form of a - this intercompany facility. That was the
typical practice. And generally, the terms that were extended would
be based on what AIG Funding is able to get. And that got passed
through to the insurance companies. That was the general practice
before 2008. And sitting here today, I continue to believe this
facility was consistent with that general practice.”).
178
04/22/2025 Tr. (Gender) at 138:21-139:3 (“Q. And was this
revolving credit agreement for the [AIG] Funding revolver drafted from
scratch? A. No. We use a boilerplate. Essentially, we had - we had
a form we’d been using for years and years. Predated me. Q. A form
that was used for - A. All intercompany notes. Q. All intercompany
notes? A. Yes.”). But see id. at 198:3-7 (“Q. And I want to just go
back: Before September 2008 at all, prior to that era when the crisis
was afoot, there was no written credit agreement between FP and any of
its affiliates that you’re aware of; correct? A. Yeah, correct.”).
179
JX-16 at 4 (“Transactions between affiliated entities should be
entered into as if between unrelated parties (i.e. on an ‘arm’s
length’ basis). Therefore exposure to credit risk, covenants, pricing
and modifications must be assessed based on the debtor’s financial
position, taking into consideration the health of its balance sheet,
income statement, cash flows, business plan, budgets, forecasts and
conditions in the market at the time of the loan.”). See also
01/23/2024 Gender Dep. at 216:8-11 (“This presentation again from my
perspective is coming up with best practices. So this is a project to
work on.”).
51
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 51 of 151

debt,
180
the Court concludes that the absence of those terms in
this case is not dispositive because the lack of those terms may
be consistent with revolving debt.
181
Furthermore, while missing
documentation usually weighs in favor of recharacterizing
advances as equity contributions,
182
that alone does not demand
recharacterization.
183
Similar to missing documents, missing
“terms” that are typical of debt instruments also do not demand
recharacterization. Therefore, the Court concludes that this
factor is neutral in this case.
180
See, e.g., Autobacs Strauss, Inc. v. Autobacs Seven Co. (In re
Autobacs Strauss, Inc.), 473 B.R. 525, 574 (Bankr. D. Del. 2012)
(concluding that “although there are numerous fixed repayment dates
stated in the loan agreements, ABST was not regularly required to make
principal payments as they came due. Therefore, this factor weighs in
favor of recharacterizing the Contested Obligations as equity.”).
181
Autostyle, 269 F.3d at 750 (finding that a demand note with no
maturity date or schedule of payments did not compel the court to
conclude the advances were equity contributions because there was a
fixed rate of interest and interest payments were made); Friedman’s,
452 B.R. at 520 (finding this factor to be neutral because there was a
maturity date but there were no principal payments required prior to
the maturity date).
182
AutoStyle, 269 F.3d at 750 (stating that an absence of
instruments of indebtedness is evidence that the advances were capital
contributions but affirming the bankruptcy court’s finding that the
instruments in that case were evidence of indebtedness). But see Roth
Steel, 800 F.2d at 631 (holding that the advances were capital
contributions in part because the lack of written instruments
“provid[ed] little if any support for a finding of bona fide debt”).
183
Liberty Brands, 2014 WL 4792053, at *4 (finding that
recharacterization was not appropriate because a witness of the party
seeking recharacterization testified that the advances were a loan,
even though there was no written instrument, the debtor made regular
payments, and the debtor ultimately repaid the loan in full).
52
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 52 of 151

c.Fixed Rate of Interest and Interest Payments
The absence of a fixed rate of interest and interest
payments “is a strong indication that the investment was a
capital contribution, rather than a loan.”
184
The FP Revolver
stated that interest would be paid monthly in arrears at a rate
to be mutually agreed upon by the parties.
185
The parties
subsequently agreed to the applicable interest rate to be paid.
186
The interest rate was an adjustable rate based on market rates.
187
184
Autobacs, 473 B.R. at 574.
185
JX-1 § 1.6(b).
186
DX-32 (“AIG Funding will pay interest on its loans from [AIG]
cost + 18bps (which rate shall reset monthly on the first day of each
month). AIG Funding will charge [FP] at the same interest rate as
above.”); DX-529 at 2-3 (emails setting interest rate); 04/22/2025 Tr.
(Gender) at 142:4-6 (testifying that there was an agreed upon interest
rate), 150:23-151:12 (testifying about interest rate discussions),
155:23-156:5 (testifying that FP’s interest rate was based on AIG’s
borrowing costs), 202:16-203:3 (testifying that there was no interest
rate in the intercompany documents because the interest rate would
fluctuate every day).
187
4/22/25 Tr. at 141:1-17 (Gender) (“Q. And does the interest
provision in the FP revolver include a fixed numerical interest rate?
A. No. This is a revolver, so it didn’t have a fixed rate. Q. Do
you know why it didn’t? A. Again, it’s a revolver so it’s being
borrowed each day. The background of all of these notes were it used
to be backed by AIG’s commercial paper program, and so our interest
rate would change on a daily basis. So there was no way to estimate
what that interest rate was going to be, and so . . . . therefore, it
was left blank, and then it would be - as we developed the data, we
would charge them what the parent’s interests costs would be. Q. So
was it standard to have the interest rate not specified in these
intercompany loan agreements? A. Absolutely.”).
53
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 53 of 151

Pursuant to that agreement, FP did make monthly interest
payments on the FP Revolver for a time.
188
The Former Executives
argue, however, that the interest rate and payments were illusory
because they were paid from AIG’s own funds that FP drew under
the FP Revolver.
189
The Former Executives further note that after
2011, FP ceased making cash interest payments and the interest
payments were instead added to the FP Revolver’s outstanding
balance (i.e., paid in kind).
190
Their expert testified that a
188
JX-86 (showing that between September 2008 and June 2011, FP made
33 interest payments in cash totaling approximately $6.1 billion and
between June 2011 and December 2022, FP paid interest in kind by
adding it to the principal amount of the loan, in an amount of
approximately $4.9 billion).
189
04/25/2025 Tr. (Liebergall) at 84:17-23 (“Q. Okay. Now, once
this borrowing started in September of 2008 from AIG to FP, FP
actually made numerous interest payments in connection with the
borrowing; correct? A. Again, they were interest payments made,
funded by themselves. So, as I mentioned to you earlier, when we’d
have a cash need, . . . we would effectively ask them for money to
give them money.”); 04/22/2025 Tr. (Gender) at 210:10–14 (“Q. And so
you would fund them for the interest payments; right? A. Again, it
depends on which day it was. If they had excess cash, they wouldn’t
need funding. If they didn’t have any cash, then they would probably
need to borrow from us.”), 211:17-23 (“Early on, in the first year or
so of the credit facility, there was a lot of cash flows going on at
FP. So, on that day, every day they had to net the position. By the
time we got into the second or third year, there weren’t many cash
flows going through FP. So at that point, they would have to borrow
because there was no really other cash flows going through the
system.”).
190
JX-86; JX-46 at 16 (Alvarez & Marsal presentation stating that
last cash interest payment was in May 2011 and all other interest
payments since were capitalized); 04/21/2025 Tr. (Habayeb) at 183:8-
10(“Well, if there’s interest that’s past due, it just gets
capitalized and rolled in. I think that’s pretty standard
practice.”); 04/22/2025 Tr. (Gender) at 212:21-23 (“Again, at some
point when there was very little cash flows going through FP, then the
interest payment would only be funded by new debt.”); 04/22/2025 Tr.
(Allison) at 58:18-21 (“Q. And from the period June 2011 to the
bankruptcy, interest was capitalized? A. That’s correct.”);
54
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 54 of 151

typical lender would only allow a borrower to pay interest in
kind for a short time, usually at a higher rate of interest, and
that allowing FP to do so from 2011 to 2022 was not consistent
with typical debt transactions.
191
FP’s expert admitted that he had never seen a parent allow
capitalized interest for more than a decade, but he opined that
lenders routinely allow a borrower to pay interest in kind to
conserve its cash flow.
192
He also noted that the parties’
04/24/2025 Tr. (Kosturos) at 58:20-23 (“Q. Okay, so based on your
study of [FP’s] books and records for over ten years before you became
CRO, the interest on the loan had been capitalized, correct? A.
That’s true.”).
191
05/07/2025 Tr. (Plastino) at 33:4-34:8 (“Q. And did you
consider, you know, that term when you were analyzing the assertion of
payment of interest in the context of this matter? A. Sure. So pay
in kind is exactly what it says. It refers to the process of, instead
of paying interest in cash, you add it to the outstanding balance and
carry it forward. But when you look at the market, pay-in-kind
arrangements, or PIK toggles, where a borrower gets to choose whether
or not to pay interest in cash or to capitalize it, they look very
different than what was - what actually occurred here. A PIK toggle
is typically short term. It’s for one or two years. And that’s
because a lender doesn’t want to give a borrower the opportunity to
continue to effectively run their business down without crossing some
tripwire that would require them to preserve the lender’s capital that
they advanced to them. The other difference is that, typically when
you have a pay-in-kind arrangement, there’s - if you capitalize the
interest, it comes at a higher rate. There’s an additional cost to
it. And that makes sense because the act of capitalizing the interest
leads to more risk. Even for a short period of time, it leads to more
risk for the lender. Q. In your review of the assertions of interest
being paid here, were they consistent with PIK interest, in your
experience? A. No. There was no premium for capitalizing the
interest; and the capitalization went on for years as opposed to for a
relatively short period of time.”).
192
05/08/2025 Tr. (Imburgia) at 82:8-12 (“Q. And you can’t recall,
one way or another, whether you have ever seen a parent extending to a
subsidiary a loan and allowing that subsidiary to capitalize interest
for more than a decade before this case, correct? A. That’s
correct.”), 42:16-23 (“Q. And in your experience, is it typical for a
55
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 55 of 151

financial statements reflected the interest paid in kind as
interest income and expense.
193
The Court concludes that the parties did agree to an
interest rate and FP did pay interest on the advances (originally
from excess cash or additional borrowings and later by adding the
interest charge to the principal balance of the loan).
Capitalizing interest alone does not support a finding that the
FP Revolver was an equity contribution.
194
However, the Court
concludes that the interest feature of the FP Revolver was not
typical of a loan transaction because the interest was paid from
additional advances under the FP Revolver or paid in kind for
more than a decade. The result was that FP was not paying
lender to permit a de-stressed borrower to capitalize interest
payments even when the loan document requires cash interest? A.
That’s common. The reason it’s common is the lender wants to make
sure, in protecting their interest, that the entity, if it doesn’t
have cash because it needs cash for business operations or other
situations, they will let them capitalize the interest.”).
193
Id. at 42:24-43:2 (“But capitalization of interest still means
that you’re reporting interest income, you’re reporting interest
expense, you’re recording the amount due. You’re just building it
into the principal.”). But see 04/23/2025 Tr. (Herzog) at 75:9-14
(“Q. So the board of AIG agreed that simplification of segment
reporting warranted elimination of, what you call, the intercompany
loan with FP, correct? A. No, I didn’t say that. I said the
objective [of the recapitalization] was the interest expense, to get
rid of the interest expense in the segment reporting.”). Compare JX-
95 at 228 (2008 AIG 10-K reporting intercompany interest expense) and
JX-99 at 238 (2009 AIG 10-K reporting interest expense for 2008 and
2009) with JX-100 at 240 (2010 AIG 10-K not reporting interest expense
for 2008, 2009, and 2010).
194
Off. Comm. Of Unsecured Creditors of Broadstripe, LLC v. Highland
Cap. Mgmt. (In re Broadstripe, LLC), 444 B.R. 51, 95-96 (Bankr. D.
Del. 2010) (finding that paid in kind interest was not determinative
of an equity contribution).
56
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 56 of 151

interest, AIG was essentially paying itself interest on the FP
Revolver. Because the FP Revolver had no fixed date by which the
principal of the loan (and the paid in kind interest) would ever
be repaid, the Court concludes that this suggests that the
transaction was equity.
d.Source of Repayments
Where “the party infusing funds . . . expects to be repaid
with interest no matter the borrower’s fortunes . . . the funds
are debt,” but where “the funds infused are repaid based on the
borrower’s fortunes . . . they are equity.”
195
“If the
expectation of repayment depends solely on the success of the
borrower’s business, the transaction has the appearance of a
capital contribution.”
196
In this case, the Fed Revolver prohibited AIG from securing
any of its intercompany loans.
197
Therefore, the only source of
repayment that AIG Funding (and therefore, AIG) could look to was
cash FP could generate from unwinding its derivative positions.
198

195
SubMicron, 432 F.3d at 456.
196
See, e.g., AutoStyle, 269 F.3d at 751; Autobacs, 473 B.R. at
574–75; Friedman’s, 452 B.R. at 521.
197
DX-26 § 6.02.
198
04/21/2025 Tr. (Allison) at 25:1-9 (“[W]hen you unwound a
position, if it had been a position that you had to post collateral
on, you would receive back the collateral and then you could sell that
and use those funds to pay down the loan or if you had a spread that
you’d earned unwinding the liability, unwinding whatever asset was
associated with it, you may have made money on that too. And you may
have - when you generated the cash from that transaction, that excess
57
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 57 of 151

Thus, repayment of the Revolver depended entirely on FP’s success
at favorably unwinding its derivative contracts.
FP argues that a borrower’s ability to repay a debt will
always turn to some extent on its success.
199
It contends that
AIG always expected to be repaid at least a part of its
advances.
200
FP asserts that it did routinely make repayments on
the FP Revolver even when it was not profitable.
201
Therefore, it
cash would be used to pay down the line.”); 04/21/2025 Tr. (Habayeb)
at 74:15-16 (“But every time there was excess cash in FP, it was used
to repay whatever balance was outstanding on the loan.”); 04/25/2025
Tr. (Liebergall) at 81:14-15 (“[I]f we had excess money, we would
return it back to the parent.”).
199
Liberty Brands, 2014 WL 4792053, at *4 (noting that courts
recognize that “all extensions of credit depend on the debtor’s
success; it does not make them capital contributions.”); State St.
Bank, 520 B.R. at 75-76 (holding that a contingency feature which
provided extra payment on maturity based on the company’s fortunes did
not require recharacterization where the principal amount of the loan
and its fixed interest were fixed and payable regardless of the
company’s success).
200
04/22/2025 Tr. (Gender) at 147:2-5, 16 (“Q. In September of
2008, as treasurer and as the one involved in the formation of the FP
loan. . . . Did you expect to get paid? A. Yes, yes.); 04/21/2025
Tr. (Habayeb) at 189:8-19 (“Q. AIG did not expect to get paid back the
entire amount it made available to FP in 2008, correct? A. So we
expected some recovery. I don’t know if it’s - you don’t know if it’s
going to be 100 percent. It became clear over time it’s going not
going to be 100 percent, but you still expect to get some recovery.
Q. In 2010 things were a little better than 2008. You’ll agree with
me on that; right, sir? A. Yes. Q. In 2010 there was a very low
probability that AIG could recover the entire principal of this so-
called loan; correct? A. Correct. The question is how much could
AIG get.”).
201
04/22/2025 Tr. (Allison) at 19:24-20:1 (“Q. And do you know if
FP still made repayments during some of those years? A. Yes.”),
20:10-17 (“Q. And has FP ever recouped all the losses it suffered in
the 2008 financial crisis? A. No. Q. Has FP repaid portions of the
revolver despite that? A. Yes. Q. And to your knowledge, has [AIG]
ever forgiven balances owed under the revolver? A. No, not to my
knowledge.”). See also JX-20 (Promissory Note with Schedule of
58
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 58 of 151

argues that repayment was not dependent on success of FP’s
business.
The Court rejects FP’s argument. Beginning in 2008, FP
ceased originating new derivative contracts and began winding
down its business.
202
Therefore, there were no profitable
business operations from which AIG could expect to be paid.
Although AIG received some payments from the winddown of FP’s
derivative contracts, the Court finds that the winddown was
intended merely to minimize AIG’s losses and was never expected
to result in repayment of AIG in full.
203
Further, many of the
repayments FP made to AIG were from new borrowings from AIG.
204
Payments); 04/22/2025 Tr. (Gender) at 163:10-25 (“Q. But just looking
at [JX-20], did FP continue to take draws through the end of October
2010 at the point that this promissory note was signed? A. Yes. Q.
And did FP continue to make principal payments through October 2010 as
well? A. Yes. Q. Based on this schedule, how frequently would you
say FP took draws and made repayments of principal from September of
2008 through October of 2010? A. On a fairly frequent basis, both
repayments and new borrowings.”).
202
See supra note 27 and accompanying text.
203
04/25/2025 Tr. (Liebergall) at 65:16-20 (“Profitability was
generally not profitability. It was how much we were going to lose.
As we were winding down and counterparties were being opportunistic,
we were generally having to exit trades at their side of the market,
meaning they were getting favorable terms versus us.”). See also
supra note 27 and accompanying text.
204
04/25/2025 Tr. (Liebergall) at 85:2-8 (“Q. FP was actually
charged interest and actually made interest payments in connection
with the borrowing from AIG to FP; correct? A. As I mentioned to
you, yes. Funding from AIG, effectively, what I’d call a round-trip,
is what they did. So, the money that we, quote, paid to them was
required to be funded by them.”); 04/22/2025 Tr. (Gender) at 212:18-23
(“Q. So prior to June 2011, what you just described, that funds were
borrowed and then repaid the next day, was the way that FP paid
interest? A. Again, at some point when there was very little cash
59
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 59 of 151

Therefore, the Court concludes that, unlike the cases cited
by FP,
205
AIG had no real expectation that it would be repaid in
full.
206
Consequently, the Court concludes that this factor
flows going through FP, then the interest payment would only be funded
by new debt.”).
205
State St. Bank, 520 B.R. at 75–76 (finding that notes were risky
and depended on the business’s success to return an additional amount
but that finding alone was insufficient to recharacterize the debt
because the lenders still expected something to be repaid); Liberty
Brands, 2014 WL 4792053, at *4 (finding that borrower made payments in
multiple years before ultimately paying off the loan).
206
04/23/2025 Tr. (Herzog) at 76:3–78:1 (Impeaching with 07/07/2022
Herzog Dep. at 206:12–207:15) (“Q. Did AIG, at any point in the time
frame that you served as AIG’s CFO, expect that the principal balance
of that loan would be repaid by FP? . . . A. Well, I won’t comment
on AIG. I don’t recall, sitting here today, or even having a vague
recollection of giving much consideration to whether it was going to
get paid back or not. The objective of the loan was to provide
funding to meet collateral calls that were stemming from contracts
that had been put on the books. I just don’t recall spending a lot of
time thinking about repayment. It was about meeting those needs,
keeping the company out of default and getting on with paying back the
US government. Q. You were AIG’s CFO after it had paid off the US
government, correct? A. Correct. Q. At that point in time, did you
give any consideration to whether FP would be able to pay off its debt
to AIG? A. I did not.”); 04/22/2025 Tr. (Gender) at 206:12–208:13
(Impeaching Gender with 01/23/2024 Gender Dep. at 185:16–186:8) (“Q.
I want to know whether or not AIG FP could ever repay these amounts.
That was something that you as treasurer - that was fully within
purview? A. I guess it would be if that was meaningful information.
Q. Well, when you say ‘meaningful,’ what could be more meaningful?
A. [FP] was 100[%] owned subsidiary of AIG. A. Okay. What is
significant about that? A. Essentially it’s – it’s intercompany
transactions so it’s eliminated in the consolidation process.”). See
also JX-13 at 3 (2010 email from Chorengel to Dahlgren, attaching
funding request) (“In order to further facilitate the unwind process
and correctly reflect the amount collectable from [FP], it is proposed
to eliminate the negative equity in [FP].”); JX-12 at 2 (2010 email
from Bhandari to Habayeb) (“It is not expected that FP will be in a
position to meet its obligations under the loan.”).
60
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 60 of 151

weighs in favor of recharacterizing the FP Revolver as equity.
207
e.Adequacy of Capitalization
“Thin or inadequate capitalization is strong evidence that
the advances are capital contributions rather than loans.”
208
At the time the funds were advanced, FP was out of cash,
facing billions in losses on its derivative contracts, and
entirely dependent on AIG.
209
The FP Revolver made FP’s financial
condition worse, not better, by adding liabilities rather than
capital. Therefore, the Court finds that FP was undercapitalized
from 2008 until FP filed for bankruptcy in 2022.
210
207
See Fid. Bond and Mortg. Co. v. Brand (In re Fid. Bond and Mortg.
Co.), 340 B.R. 266, 303 (Bankr. E.D. Pa. 2006), aff’d sub nom. Fid.
Bond & Mortg. Co. v. Brand, 371 B.R. 708 (E.D. Pa. 2007)
(recharacterizing advances as equity based on expert testimony that
the promissory notes were never intended to be repaid).
208
AutoStyle, 269 F.3d at 751.
209
04/21/2025 Tr. (Habayeb) at 53:12-21 (“Q. And can you describe
the financial state of FP during 2007 and the summer of 2008. A. So
FP was being subjected to pretty material collateral calls on their
derivatives, especially on the credit default swaps on the multi-
sector CDO. And part of the issue there is in the CSAs, instead of
referencing the market value of the derivative, it referenced the
value of the bond that was being ensured. And so that drove big
valuations. And FP ran out of cash, and AIG had to step in and start
advancing cash to meet FP’s obligations.”), 55:2-3 (“By the summer of
2008, FP was out of cash. It was dependent on support from AIG.”).
210
05/07/2025 Tr. (Plastino) at 37:11-16 (“So, in other words, if
those advances are treated as debt, the liabilities that FP had
exceeded its assets by $23 billion dollars, indicating not just that
it was undercapitalized or thinly capitalized, but there actually was
no capital at all in order to support their repayment of the
advances.”); 05/08/2025 Tr. (Imburgia) at 18:16-18 (“Q. Do you and
Mr. Plastino further agree that FP was undercapitalized in September
2008? A. Yes.”); 04/22/2025 Tr. (Allison) at 62:18-20 (“Q. And in
your view, sir, [FP] has been insolvent since 2008? A. [FP] has been
balance sheet insolvent since 2008.”), 64:22-25 (“Again, I don’t think
61
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 61 of 151

Undercapitalization at the time the advances were made weighs in
favor of recharacterizing the advances as loans.
211
FP argues that this factor has limited weight in the Third
Circuit because courts do not want to discourage preexisting
lenders from protecting their existing investment by extending
additional loans.
212
FP asserts that this case is similar because
AIG was making defensive advances to ensure derivative
counterparties could not declare a default and call on the
Guarantee, which would cause AIG itself to collapse.
213
it’s the revolver that makes FP insolvent. It was the losses that FP
suffered in the financial crisis that made it insolvent. . . .”);
04/21/2025 Tr. (Habayeb) at 100:17-21 (“Q. So FP didn’t have
sufficient cash, and the belief was that AIG itself didn’t have
sufficient cash? A. Yeah. FP had no cash. AIG had cash and some
access on the Fed facility, but we were concerned that was not enough
to cover the downside risk of what may transpire.”).
211
See, e.g., AutoStyle, 269 F.3d at 751 (“holding that the adequacy
of capitalization is assessed not just at the creation of the debtor
but at the time of the challenged transactions as well ); Friedman’s,
452 B.R. at 522 (finding that undercapitalization before and after the
challenged transaction weighed in favor of recharacterization).
212
SubMicron 432 F.3d at 457 (stating that capitalization concerns
are less important when a lender is making a loan to a distressed
company to protect existing loans). See also Fairchild Dornier GMBH
v. Off. Comm. Of Unsecured Creditors (In re Dornier Aviation (N. Am.),
Inc.), 453 F.3d 225, 234 (4th Cir. 2006) (stating that the lender’s
insider status and undercapitalization alone were insufficient to
recharacterize a loan because the insider might be the only party
willing to help a struggling business and the Court did not want to
discourage good faith loans); HH Liquidation, 590 B.R. at 293-94
(finding that the undercapitalization factor carried little weight
where lenders were making defensive advances to maintain long-term
leases).
213
See supra notes 17-20 and accompanying text. See also 04/25/2025
Tr. (Liebergall) at 59:13-16 (“FP had to make payments. If FP failed
to make payments, then an event of default and . . . cross-defaults
were what we were looking to avoid.”); 04/21/2025 Tr. (Habayeb) at
100:11-16 (“Q. And where FP could not fund collateral calls on
62
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 62 of 151

The Former Executives argue that the Guarantee, which was
only a potential liability for AIG, differs from a secured loan
where the lender has already put cash into the company and is
seeking to protect its position. They assert that the Guarantee
was, in contrast, a means by which AIG avoided adequately
capitalizing FP with cash at the time of the financial crisis.
The Court agrees with the Former Executives that a Guarantee
is distinguishable from a cash infusion in the form of a loan.
214

derivatives, who would have to step in to pay for those? A. So AIG
would have to step in. And based at the time when we looked at it,
based on the cash AIG had and what’s available on the 85 billion [Fed]
facility, we didn’t believe we had sufficient [funds] to be able to
maintain these positions.”), 158:13-18 (“Q. And this caused a
liquidity bleed that made AIG go to the Fed? A. Yeah, . . . it was
putting AIG on the verge of bankruptcy.”); 04/23/2025 Tr. (Herzog) at
36:2-7 (“Q. FP used loans from AIG and funded by the Fed to satisfy
cash collateral postings. Is that consistent with your recollection
of how FP was actually paying these collateral calls? A. That was
certainly a part of it, yes, was getting the money from the parent
company.”); 04/23/2025 Tr. (Stubbs) at 192:11-20 (“Q. Right. Because
ultimately, you’re at [AIG]’s mercy on whether they will fund you;
right, sir? A. So, yeah, obviously, if we have a cash shortfall and
we need to borrow money, we would try and borrow under the line. But
obviously, AIG has the option not to lend us the money; right. But as
we’ve explained, they have a vested interest or, you know, they’re
aligned with us because if they don’t pay us the money, we default on
the payment and they end up with potentially a significant loss.”);
05/08/2025 Tr. (Imburgia) 26:7-14 (“ [FP], had they defaulted, the
guarantees would have been called and created much more exposure [for
AIG on the Guarantee].”), 99:22-100:3 (“Q. For example, AIG could not
go out, in your view, and pay FP’s counterparties directly because
that would mean that FP would have had an event of default, right? A.
Yes. They would be cross-defaults. And then – then you’re off to
the races with potentially a lot more exposure because of having to
liquidate, kind of a fire-sale situation.”).
214
05/07/25 Tr. (Plastino) 62:6–11 (“[T]here was always a chance
that AIG FP would find itself in a distressed situation, because its
own capital would have been insufficient, and that AIG would actually
need to put real equity capital into the business to support that
trading book and to prevent AIG FP from defaulting on its
obligations.”).
63
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 63 of 151

Therefore, the cases FP cites are inapposite because AIG was not
a lender trying to protect its position as a lender. Even if AIG
was defending a pre-existing loan, that loan would not negate
FP’s undercapitalization at the time of the advances as a
relevant factor in the recharacterization analysis.
215
Therefore,
the Court concludes that FP’s undercapitalization suggests that
the advances were equity contributions.
f.Identity of Interests
“If stockholders make advances in proportion to their
respective stock ownership, an equity contribution is
indicated.”
216
This factor is most relevant when there are
multiple stockholders who make advances to a debtor.
217
215
See, e.g., Dornier, 453 F.3d at 234 (rejecting argument that
insider’s agreement to continue to supply debtor with inventory was a
debt because the debtor had a long history of unprofitability, was
insolvent, and repayment was dependent on achieving profitability);
Autobacs, 473 B.R. at 577 (while acknowledging that insiders often are
the only ones willing to lend when a debtor is insolvent, nonetheless
holding that insider status and insolvency are factors to be
considered in recharacterization claims).
216
AutoStyle, 269 F.3d at 751 (“Where there is an exact correlation
between the ownership interests of the equity holders and their
proportionate share of the alleged loan . . . this evidence standing
alone is almost overwhelming.”) (quoting In re Cold Harbor Assocs.,
L.P., 204 B.R. 904, 919 (Bankr. E.D. Va. 1997.
217
Friedman’s, 452 B.R. at 522 (finding that this factor weighed in
favor of recharacterization because the complaint alleged that there
was an “exact correlation” between the shareholders and their share of
the advances made to the borrower).
64
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 64 of 151

FP argues that because AIG owned 100% of FP, this factor is
not relevant.
218
The Former Executives argue that courts have
rejected FP’s argument.
219
The Court agrees with the Autobacs Court’s analysis and
finds that this factor favors recharacterizing the FP Revolver as
an equity investment in this case.
220
g.Security for the Advances
FP did not pledge any collateral to AIG for the advances it
made.
221
This may suggest that the FP Revolver was equity rather
than debt.
222
218
See, e.g., Redmond v. Jenkins (In re Alternate Fuels, Inc.), 789
F.3d 1139, 1151 (10th Cir. 2016) (discounting this factor in the case
of a sole shareholder because “[w]e see no reason to assume that all
funds transferred to a business owned by a single stockholder must be
in the nature of equity.”); Daewoo Motor Am. Inc. v. Daewoo Motor Co.,
Ltd. (In re Daewoo Motor Am.) 471 B.R. 721, 742 (C.D. Cal. 2012)
(holding that where there is a single shareholder, “this factor is
largely irrelevant.”), aff’d, 554 F. App’x 638 (9th Cir. 2014).
219
See, e.g., Autobacs, 473 B.R. at 578 (rejecting argument that
this factor is inapplicable where the parent of a wholly owned
subsidiary is the sole lender because the parent could have obtained
outside investors or lenders but chose “to retain control (or whatever
other benefits they see in sole equity ownership and sole lender
status) [and thereby] risk[ed] this factor weighing against them in a
recharacterization claim.”).
220
Id.
221
04/22/2025 Tr. (Gender) at 199:17-20 (“Q. [T]he revolver, as per
this case, between Funding - AIG Funding and FP was uncollateralized,
right? A. Correct.”).
222
AutoStyle, 269 F.3d at 752 (stating that no security was
indicative of an equity contribution but finding that the lending
facility was properly secured, suggesting that the advances were
debt).
65
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 65 of 151

FP argues that lack of security for the loan is not given
much weight in this Circuit.
223
The Court finds the authority
cited by FP to be distinguishable, because it involved additional
advances by a creditor which already had security for its loan.
224

In this case, AIG was not a secured lender of FP seeking to
preserve that status by lending additional sums that would also
be secured.
225
FP also asserts that the unsecured loan to FP was consistent
with the historical practice of intercompany lending done by AIG
through AIG Funding.
226
However, the testimony on that point was
conflicting.
227
223
See, e.g., Off. Comm. of Unsecured Creditors of Moll Indus. Inc.
v. Highland Capital Management L.P. (In re Moll Indus.), 454 B.R. 574,
584 (Bankr. D. Del. 2011) (Bankr. D. Del. 2010) (“[D]ebt should not be
recharacterized simply because the preexisting lenders extend
additional loans to distressed borrowers, even where there is no
additional collateral to support the new loans.”).
224
Id.
225
See supra note 221 and accompanying text; D.I. 82 at 29 (FP’s
Bankruptcy Schedules listing AIG as an unsecured creditor and the FP
Revolver as unsecured debt).
226
04/22/2025 Tr. (Gender) at 135:6-7 (“It was already our corporate
practice that when we did intercompany loans, we did not require
collateral.”).
227
04/25/2025 Tr. (Liebergall) at 118:15-18 (“Q. Were there other
intercompany liabilities during the time frame that you worked at FP
that were intercompany and collateralized? A. Yes.”).
66
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 66 of 151

FP contends further that the Fed Revolver precluded AIG from
making a secured intercompany loan.
228
While there may have been
reasons why AIG could not obtain security for its loan, the Court
finds that they do not diminish the fact that the advances under
the FP Revolver were not secured.
229
Therefore, the Court concludes that this factor suggests
that the FP Revolver was an equity investment, not a debt.
230
h.Ability to Obtain Outside Financing
FP could not obtain outside financing,
231
suggesting that the
228
See DX-26 §§ 6.01(c) (“Borrower will not, nor will it cause or
permit any Restricted Subsidiary to[] Incur, create, assume or permit
to exist any Indebtedness, except[] intercompany Indebtedness of the
Borrower and the Subsidiaries to the extent permitted by Section
6.04(c)[.]”), 6.04(c) (“any such loans and advances made to a Loan
Party shall be unsecured”); 04/22/2025 Tr. (Gender) at 135:7-11 (“But
with the Fed facility, the Fed facility specifically restricted our
ability to use - have any collateral for any of our intercompany
loans. It was essentially forbidden under the credit facility.”). See
supra note 22 and accompanying text.
229
05/07/2025 Tr. (Plastino) at 46:18-21 (“The AIG FP advances were
unsecured. And regardless of the reason for that, any - all things
being equal, a loan that is unsecured will generally be harder to
obtain and more expensive than one that is.”).
230
See, e.g., Autobacs, 473 B.R. at 578-79 (concluding that this
factor weighed in favor of recharacterizing the advances as an equity
contribution where the advance was not secured and finding that a
public statement that the debtor would not incur additional secured
debt did not change the analysis) (emphasis added).
231
04/21/2025 Tr. (Habayeb) at 55:7-11 (“Starting in August and
leading up to September, AIG started exploring third-party solutions
to raise capital or liquidity. And then that culminated in being
unable to get anything done on the private side and having the last
resort being the [Fed].”), 184:15–17 (“Q. You’ll agree with me that a
third party never would have extended FP a loan on any terms in 2008,
right? A. Correct.”); 04/22/2025 Tr. (Gender) at 133:21–25 (“Q. At
that time in September of 2008, did AIG have other options for
Funding? For example, from banks, private equity or any other third-
party lenders? A. By the time we reached the Fed, we had exhausted
67
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 67 of 151

FP Revolver was equity.
232
However, the Court finds that even a
healthy company would have struggled to get third-party financing
during the financial crisis in 2008.
233
Therefore, this factor
does not help the Court determine whether the FP Revolver was a
loan or equity infusion.
234
Rather, the Court concludes that this
factor is neutral because of the extraordinary circumstances
existing at the time.
i.Extent Advances Were Subordinated
Subordinating a claim to all other creditors’ debts can be a
sign that the advance is a capital contribution, not debt.
235

When the advances are paid on par with outside creditors,
all other kind of third-party funding mechanisms.”); 05/08/2025 Tr.
(Imburgia) at 82:2–7 (“Q. Now, in your opinion, no third party would
lend to [FP], no matter what the interest rate, correct? A. Yes. I
think, in my deposition, you asked me about the market rate for
interest, and I said that hypothetical probably doesn’t make sense if
lenders would be worried about being able to get their principal
back.”).
232
See, e.g., AutoStyle, 269 F.3d at 752 (“When there is no evidence
of other outside financing, the fact that no reasonable creditor would
have acted in the same manner is strong evidence that the advances
were capital contributions rather than loans.”) (emphasis added).
233
05/07/2025 Tr. (Plastino) at 39:8-11 (“[I]t would have been
challenging for even potentially a healthy borrower to raise money in
the market at that time because companies were hoarding cash.”).
234
See, e.g., Moll Indus., 454 B.R. at 584 (giving little weight to
this factor because “[e]xisting lenders are often the only source of
funding when a debtor faces distress. Therefore, inability to obtain
alternative financing is insufficient to support
recharacterization.”).
235
AutoStyle, 269 F.3d at 752 (“Subordination of advances to claims
of all other creditors indicates that the advances were capital
contributions and not loans.”).
68
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 68 of 151

however, the advances resemble debt.
236
FP argues that it made payments of principal and interest on
the FP Revolver over the course of the loan,
237
at the same time
it owed other creditors, proving that the FP Revolver was not
subordinated to those creditors. However, the Former Executives
argue that this is negated by the fact that most of the payments
made by FP on the FP Revolver were funded by new advances from
AIG itself.
238
The Court finds that the FP Revolver was not contractually
subordinated to other creditors’ claims.
239
However, because AIG
had guaranteed all of FP’s obligations to third parties,
240
the
236
Friedman’s, 452 B.R. at 523 (holding that this factor weighed in
favor of characterizing the note as debt because the advances would be
repaid with general unsecured debt and ahead of subordinated debt and
equity).
237
DX-86; 04/25/2025 Tr. (Liebergall) at 81:14-17 (“[W]hen we had
the money - if we had excess money, we would return it back to the
parent. And when we needed money to satisfy those obligations, we
would ask the parent for th[e] funds.”); 04/21/2025 Tr. (Habayeb) at
188:13-18 (“[W]henever there’s excess cash, that got repaid back to
the parent to repay a portion of the Fed loan. And if you look at
that from 2008 ‘til the future, there was always periods where cash
builds up in FP and that goes back towards to a partial repayment on
the loan to AIG.”).
238
See supra note 204 and accompanying text.
239
See generally JX-1 (No explicit subordination clause in the FP
Revolver).
240
See CCPX-4 (AIGFP General Guarantee Agreement, Dec. 4, 1995);
05/07/2025 Tr. (Plastino) at 47:1-10 (“So it was my understanding,
based on my discussions with counsel, that, effectively, through the
guarantee, that the [FP] advances were subordinated to all the claims
of third-party creditors. And so it’s sort of – regardless of what
you call the advances, it’s sitting in a first-loss position. And
it’s going to be the returns - both the return of capital and return
69
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 69 of 151

Court concludes that any claim of AIG was functionally
subordinate to claims of those creditors. In addition, the fact
that FP was only making payments on the FP Revolver when it had
available cash
241
and AIG was not putting any pressure on FP to
repay the loan
242
suggests that AIG’s claim was subordinated.
243

Therefore, the Court finds that this factor weighs in favor of
recharacterizing the advances as equity contributions.
244
j.Extent Advances Were Used to Acquire Capital
Assets
FP did not use the advances to acquire any capital assets,
instead it used the advances to meet collateral calls and
operating expenses while it wound down the derivative contracts
on capital is going to be highly correlated with the performance of
the [FP’s] business, which is a feature that’s consistent with an
equity investment rather than debt.”).
241
See supra notes 147, 164, 198 and accompanying text.
242
See supra note 127 and accompanying text.
243
See, e.g., Autobacs, 473 B.R. at 580 (holding that this factor
suggested that the advances were equity because the creditor had not
insisted on payment when payment was due) (citations omitted).
244
See, e.g., AutoStyle, 269 F.3d at 752 (stating that
“[s]ubordination of advances to claims of all other creditors
indicates that the advances were capital contributions and not loans”
but finding this factor was only a slight indication the advances were
equity because only some of the creditors had agreed to subordinate
their claims to other creditors); Autobacs, 473 B.R. at 580 (holding
that this factor suggested that the advances were equity because the
creditor had not insisted on payment when payment was due) (citations
omitted).
70
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 70 of 151

business.
245
This would suggest that the advances were debt
rather than equity.
246
The Former Executives argue, however, that the advances were
not used for ongoing business operations of FP, instead they were
used to wind down its business solely at the direction of, and
for the benefit of, AIG.
247
The Court agrees with the Former Executives that this factor
does not readily suggest that the FP Revolver was debt instead of
equity. Although FP did not use the funds to acquire capital
assets, FP was not using the funds for new business operations
from which it could generate profits to repay the FP Revolver.
248

Instead, the funds were used at the direction of AIG to unwind
FP’s derivative contracts in a manner that would reduce AIG’s
245
04/22/2025 Tr. (Allison) at 26:11-13 (“Q. And to your knowledge,
did FP ever use funds drawn from the revolver to purchase capital
assets? A. Not to my knowledge.”); 04/21/2025 Tr. (Habayeb) at
96:4-7 (“Q. How about for capital improvements? A. No. The only
time FP used funds to buy assets is to buy issued treasuries or agency
securities that would be posted as collateral.”).
246
AutoStyle, 269 F.3d at 752-53 (finding that using advances for
working capital, not capital assets, weighed in favor of
characterizing the advances as debt).
247
See 04/22/2025 Tr. (Allison) at 65:22–66:4 (“Q. And the entire
time the revolver has been outstanding, FP has been in wind-down mode,
right, sir? A. That’s correct. Q. It’s your view, sir, that since
September of 2008, FP has been in winddown mode? A. That’s
correct.”); 04/21/2025 Tr. (Habayeb) at 157:1-3 (“Q. And the wind-
down also meant that FP could not pursue or would not pursue new
business opportunities; right, sir? A. That’s correct.”).
248
05/07/2025 Tr. (Plastino) at 47:15–18 (“So the funds were used,
as I understand it, to fund collateral calls and AIG FP’s obligations
to its counterparties. So it wasn’t used for ordinary operations; it
wasn’t used for capital investments.”).
71
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 71 of 151

risk on its Guarantee of those contracts.
249
Thus, the Court concludes that this factor is neutral.
k.Presence of Sinking Fund to Repay Advances
The FP Revolver did not establish a fund to repay the
advances it received from AIG through AIG Funding.
250
That is an
indication that the advances were an equity contribution rather
than a debt.
251
FP argues that because the facility was a revolver, any
sinking fund payments could simply be reborrowed, making a
249
04/25/2025 Tr. (Liebergall) at 61:2–11 (“Q. And did your
responsibilities change when the wind-down started versus what they
were before the wind-down? A. Yes. Q. How so? A. Prior to the
wind-down, we were obviously all the front office folks, which I was
part of, were looking to generate revenue for FP and [AIG]. Post-
crisis, all of the attention of our - all of our duties moved to
reducing risk and working with AIG to mitigate risk.”), 64:19–67:8
(testifying how the winddown focused on “derisking” the [FP] portfolio
and used different performance metrics, for example “[p]rofitability
was generally not profitability. It was how much we were going to
lose.”), 84:8-16 (“Q. But it’s true, sir, isn’t it, that even after
that point, it was FP that was actually executing the day-to-day work
of the company, FP, during the wind-down? A. Yes. We were given
guidelines from the steering committee to operate under, and we
executed them within those - within that - within that framework at
their direction. And then obviously, to the extent that there was
something that didn’t fit into the guidelines, they would have to
approve.”); 04/21/2025 Tr. (Habayeb) at 150:24-151:1 (“Q. Fair to say
that voting members [of the steering committee] were AIG executives
and leaders? A. Correct.”).
250
05/07/2025 Tr. (Plastino) at 47:19-24 (“Q. Presence of a sinking
fund, Factor 11 is that one you considered? A. Yes. I observed that
there was no sinking fund associated with the [AIG] advances. Again,
all other things being equal, a sinking fund generally provides some
additional assurance to a lender that they will be repaid.”).
251
AutoStyle, 269 F.3d at 753 (“The failure to establish a sinking
fund for repayment is evidence that the advances were capital
contributions rather than loans.”); Autobacs, 473 B.R. at 581 (finding
that the lack of sinking fund weighed in favor of recharacterization).
72
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 72 of 151

sinking fund of little use. It also contends that many debt
facilities do not have sinking funds. However, the cases cited
by FP for this proposition involved loans secured by collateral,
making a sinking fund unnecessary.
252
As noted above, the FP
Revolver was not secured by any collateral.
253
The Court concludes that because there was no sinking fund,
this factor supports a finding that the FP Revolver was equity
rather than debt.
254
3.Conclusion
After considering all of the facts of this case, the Court
concludes that, under both the multi-factor test of the Sixth
Circuit’s Autostyle decision and the economic reality test of the
Third Circuit’s SubMicron decision, the FP Revolver was an equity
contribution, not a loan. Therefore, the Court will enter
judgment in favor of the Former Executives on their counterclaim
against FP and AIG, and against FP on Count One of its Complaint,
declaring that the advances made by AIG under the FP Revolver are
equity not debt.
252
See, e.g., Autostyle, 269 F.3d at 753 (finding that liens
obviated the need for a sinking fund); HH Liquidation, 590 B.R. at 296
(same); Moll Indus., 454 B.R. at 585 (same).
253
See supra at notes 197-98 and accompanying text.
254
See AutoStyle, 269 F.3d at 753 (lack of a sinking fund is an
indication the advance was equity).
73
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 73 of 151

B.Equitable Subordination
The Former Executives argue that, even if the FP Revolver is
not recharacterized, AIG’s unsecured claim for the advances made
to FP must be equitably subordinated to the claims of the Former
Executives. Although the relief sought under the equitable
subordination claim is similar to the relief sought and granted
for the recharacterization claim, the Court addresses the
equitable subordination claim in the event its ruling on the
recharacterization claim is appealed and not affirmed.
“Recharacterization and equitable subordination address
distinct concerns. Equitable subordination is apt when equity
demands that the payment priority of claims of an otherwise
legitimate creditor be changed to fall behind those of other
claimants.”
255
The Court may exercise its equitable power to
subordinate a claim where (1) the claimant engaged in some type
of inequitable conduct; (2) the misconduct resulted in injury to
the creditors or conferred an unfair advantage on the claimant;
and (3) equitable subordination of the claim is not inconsistent
with the Bankruptcy Code.
256
“The essential purpose of equitable
subordination is to undo any inequality in the claim position of
255
SubMicron, 432 F.3d at 454 (citing Citicorp Venture Cap., Ltd. v.
Comm. of Creditors Holding Unsecured Claims, 160 F.3d 982, 986–87 (3d
Cir. 1998); AutoStyle, 269 F.3d at 749).
256
Shubert v. Lucent Techs. Inc. (In re Winstar Commc’ns, Inc.), 554
F.3d 382, 411 (3d Cir. 2009) (citing Benjamin v. Diamond (In re Mobile
Steel Co.), 563 F.2d 692, 699–700 (5th Cir. 1977)).
74
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 74 of 151

a creditor that will produce injustice or unfairness to other
creditors in terms of distribution of the estate.”
257
1.Inequitable Conduct
The party seeking to equitably subordinate another’s claim
bears the initial burden of presenting material evidence of
inequitable or unfair conduct that injured creditors or conferred
an unfair advantage.
258
Once that party provides sufficient
evidence, the claimant opposing subordination bears the burden of
proving the fairness of the challenged transaction.
259
AIG, as the parent of FP, was an insider.
260
As a result,
the transactions between AIG and FP are subject to rigorous
scrutiny.
261
“For non-insiders, inequitable conduct must be
257
In re Mid-Am. Waste Sys., Inc., 284 B.R. 53, 68 (Bankr. D. Del.
2002).
258
See, e.g., Mobile Steel, 563 F.2d at 701 (requiring the party
objecting to the insider’s claim to put forth evidence of the claimed
inequitable conduct). See also U.S. v. Noland, 517 U.S. 535, 538-39,
43 (1996) (holding that Bankruptcy Code incorporated prior caselaw on
equitable subordination, including Mobile Steel but concluding that
bankruptcy court cannot equitably subordinate an entire category of
claims such as post-petition tax penalties and leaving open the
question whether misconduct is required to subordinate a specific
claim).
259
Mid-Am. Waste, 284 B.R. at 69.
260
11 U.S.C. § 101(2) & (31)(E).
261
Winstar, 554 F.3d at 412 (concluding that creditor was an insider
and its dealings with the debtor were to be “rigorously scrutinized”
by the court) (citations omitted); Mid-Am. Waste, 284 B.R. at 70
(stating that standard of proof for insider and fiduciary claimants is
material evidence of unfair conduct rather than egregious conduct or
gross misconduct). See also Adv. D.I. 81 at 24-25 (“The Court finds
that, as the parent of the Debtor, AIG was an insider of the Debtor as
defined in the Bankruptcy Code. . . . Therefore, the Court concludes
75
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 75 of 151

‘egregious conduct’ such as ‘fraud, overreaching, or spoliation.’
Conversely, for insiders, inequitable conduct requires only
‘material evidence of unfair conduct’ or, ‘any unfair act by the
creditor as long as the conduct affects the bankruptcy results of
the other creditors.’”
262
This is because an “insider creditor is
typically in a position to exert control over the debtor. The
creditor may also share common management and/or ownership with
the debtor. In its efforts to collect its debt, therefore, the
[insider] creditor may act directly or cause the debtor to
act.”
263
Courts have found inequitable conduct where the insider or
fiduciary:
(i)dominated and exploited the debtor;
(ii)violated the “rules of fair play and good
conscience;”
(iii)engaged in illegal or fraudulent conduct;
(iv)breached fiduciary duties owed to the debtor,
stockholders, or creditors;
(v)used “the debtor as a mere instrumentality or
alter ego;”
(vi)breached a contract; or
that AIG’s actions vis a vis the Debtor are subject to the heightened
scrutiny standard.”).
262
Youngman v. Yucaipa Am. All. Fund I, L.P. (In re Ashinc Corp.),
629 B.R. 154, 217 (Bankr. D. Del. 2021) (collecting cases, citations
omitted) (quoting Citicorp Venture Cap., Ltd. v. Comm. of Creditors
Holding Unsecured Claims, 323 F.3d 228, 234 (3d Cir. 2003), proposed
findings of fact and conclusions of law on non-core claims adopted in
part and rejected in part on other grounds, 2022 WL 2666888 (D. Del.
July 11, 2022).
263
Broadstripe, 444 B.R. at 79 (quoting Official Comm. of Unsecured
Creditors of Toy King Distrib. v. Liberty Sav. Bank, FSB (In re Toy
King Distrib., Inc.), 256 B.R. 1, 198 (Bankr. M.D. Fla. 2000)).
76
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 76 of 151

(vii)if a controlling stockholder, undercapitalized the
debtor or capitalized the debtor with debt.
264
The Former Executives contend that they have established
that AIG acted inequitably and harmed them by (a) dominating and
controlling FP, (b) causing FP to breach the Compensation Plans
by not restoring the Former Executives’ balances, while
misleading the Former Executives into believing they would be
restored, (c) lending funds rather than properly capitalizing FP
and aborting its decision to recapitalize that loan in 2010 when
it learned that doing so might restore the Former Executives’
claims under the Compensation Plans, (d) delaying FP’s bankruptcy
filing until AIG’s exposure on its Guarantee of FP’s third
parties’ claims was significantly reduced, and (e) causing FP to
transfer most of its assets and business shortly before the
bankruptcy filing in 2022 solely to benefit itself.
a.AIG’s Control of FP
FP contends that it maintained corporate separateness from
AIG and followed proper corporate formalities from its inception
through the Petition Date, including through maintaining its own
(i) board of directors, (ii) officers, (iii) internal financial
statements, (iv) books and records, (v) legal department, and
(vi) contracts.
265
264
Ashinc Corp., 629 B.R. at 217-18 (citations omitted).
265
04/22/2025 Tr. (Allison) at 11:21-12:14 (“Q. From 2008 to the
present, has FP had its own officers? A. Yes. Q. Same time period,
has FP maintained its own corporate records? A. Yes. Q. Same time
77
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 77 of 151

Despite the separate corporate forms, the Court finds that
AIG did control FP from 2008 to the present.
266
The evidence
shows that AIG obtained dominance and control of FP in 2008,
inter alia, by removing all independent directors from FP’s board
and installing AIG executives such as Herzog and Dooley, who
consistently acted in AIG’s interest.
267
Further, FP’s officers
were either AIG employees or reported directly to AIG officers.
268
FP argues that the Former Executives’ control argument is
insufficient to prove inequitable conduct and is a disguised
veil-piercing argument that the Former Executives do not have
standing to bring.
269
They contend that courts have held that
period, has FP had contracts in its own name? A. Yes. Q. Same time
period, has it had its own legal department? A. Yes. Q. Same time
period, has it tracked its intercompany payables and receivables? A.
Yes. Q. Same time period, has it - does it have its own books and
records? A. Yes. Q. Likewise same time period, has it prepared its
own internal financial statements? A. Yes.”).
266
See supra notes 29-36 and accompanying text. See also CCPX-71 at
1 (06/29/2008 email from Habayeb to Herzog) (“[FP] needs to be
integrated into AIG and cannot operate autonomously as it did in the
past.”).
267
See supra notes 31-32 and accompanying text. See also 08/10/2022
Dooley Dep. at 39:2-4 (“Q. So you always viewed yourself as an [AIG]
employee, is that correct?” A. Absolutely.”); JX-14 (email dated
09/02/2010 from David Herzog stating “I don’t care how it’s driven,
we’re not paying the deferred comp. We’ll reverse/rescind the capital
contribution before we pay deferred comp.”); 04/23/2025 Tr. (Herzog)
at 57:11-13 (“Q. Now, again, were you making this statement and this
decision [about the Compensation Plans] in your capacity as CFO of
AIG, Inc.? A. Yes.”).
268
See supra notes 29-30 and accompanying text.
269
See Harrison v. Soroof Int’l, Inc., 320 F. Supp. 3d
602, 614-27 (D. Del. 2018) (concluding that alter ego claim was a
general claim which only the bankruptcy trustee had standing to
78
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 78 of 151

equitable subordination based on excessive control is proper only
in the extreme cases of “claimant’s use of the debtor as a mere
instrumentality or alter ego.”
270
The Court agrees that a parent’s control of a debtor
(through overlapping officers and directors) is insufficient
alone to support an equitable subordination claim. However, the
Court concludes that the manner in which AIG used its control of
FP, as detailed below, to benefit itself and to harm FP and its
creditors supports the conclusion that its claim should be
equitably subordinated.
b.Breach of Compensation Plans
For purposes of deciding the Initial Issues only, FP stated
that the Court can assume that it breached the Compensation
Plans, but that any actual breach or determination of the amount
of damages caused will be decided in the second phase of the
bring); NJ Dep’t of Env’t Prot. v. Occidental Chem. Corp. (In re Maxus
Energy Corp.), 571 B.R. 650, 660 (Bankr. D. Del. 2017) (holding that
trustee has standing to bring alter ego claim on behalf of all
creditors); Rosener v. Majestic Mgmt., Inc. (In re OODC LLC), 321 B.R.
128, 136 (Bankr. D. Del. 2005) (same).
270
HH Liquidation, 590 B.R. at 298 (stating that a claimant’s use of
the debtors as a mere instrumentality or alter ego is inequitable
conduct); Mid-Am. Waste, 284 B.R. at 70 (noting that “use of the
debtor as a mere instrumentality or alter ego” in one of several bases
to equitably subordinate an insider’s claim). Cf. Wenske v. Blue Bell
Creameries, Inc., C.A. No. 2017-0699-JRS, 2018 WL 5994971, at *5 (Del.
Ch. Nov. 13, 2018) (holding that plaintiffs did not state a claim for
veil-piercing with allegations of dominion and control).
79
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 79 of 151

trial.
271
Further, it disputes the contention that AIG caused FP
to breach those contracts.
FP argues, however, that even if AIG did cause it to breach
the Compensation Plans, doing so is insufficient. FP asserts
that inequitable conduct must be more than simply exercising
bargained for contractual rights to the detriment of another or a
simple breach of a contract.
272
In fact, FP argues that “a parent
company does not engage in tortious conduct when it directs its
wholly-owned subsidiary to breach a contract that is no longer in
the subsidiary’s economic interest to perform.”
273
The Former
Executives respond that causing a subsidiary to breach contracts
with outside creditors so that a controlling insider can obtain
an advantage over those creditors is inequitable conduct.
274
271
03/13/2025 Tr. at 17:3-4 (Counsel for FP) (“In the phase one
trial, the former executives can assume breach.”).
272
See, e.g., Kham & Nate’s Shoes No. 2, Inc. v. First Bank of
Whiting, 908 F.2d 1351, 1357 (7th Cir. 1990) (stating that “[f]irms
that have negotiated contracts are entitled to enforce them to the
letter, even to the great discomfort of their trading partners,
without being mulcted for lack of ‘good faith’” and concluding that
lender’s decision not to advance entire loan amount was not
inequitable); Daewoo Motor, 471 B.R. at 748 (stating that a simple
breach of contract, without any evidence of advantage-taking, is
insufficient to justify equitable subordination).
273
Boulevard Assocs. v. Sovereign Hotels, Inc., 72 F.3d 1029, 1036
(2d Cir. 1995).
274
See, e.g., Machinery Rental, Inc. v. Herpel (In re Multiponics,
Inc.), 622 F.2d 709, 715-22 (5th Cir. 1980) (finding, among other
inequitable deeds, insiders inequitably caused a failing business to
take on more debt to pay themselves); Ashinc, 629 B.R. at 219–21
(finding that there was no dispute of material fact that the insider
took advantage of the debtor by, inter alia, wrongfully causing the
debtor to take on debt and pay its professionals’ fees to the injury
80
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 80 of 151

The Court concludes that the Former Executives have the
better argument. The cases cited by FP are distinguishable
because, inter alia, they involved a non-insider creditor, a
trivial breach or no breach of contract at all, or a tortious
interference with contract claim, not an equitable subordination
claim.
275
The cases cited by the Former Executives, in contrast,
do hold that causing the debtor to breach a contract may be the
basis for equitably subordinating an insider’s claim.
276

Therefore, the Court rejects FP’s argument that any actions taken
by AIG to cause FP to breach the Compensation Plans cannot
support equitable subordination of AIG’s claims.
The Former Executives contend that in this case AIG caused
FP to breach the Compensation Plans, specifically by preventing
it from formulating a plan to restore their negative balances by
of other creditors).
275
Boulevard Assocs., 72 F.3d at 1035-36 (case involving a tortious
interference claim, not an equitable subordination claim); Kham and
Nate’s Shoes, 908 F.2d at 1359 (concluding that non-insider creditor’s
provision of only written notice, where the contract required
telephonic notice, was a trivial breach that did not justify equitably
subordinating the creditor’s claim); Daewoo Motor, 471 B.R. at 748-49
(holding that parent had not breached contract with its subsidiary and
that the subsidiary was collaterally estopped from relitigating other
facts that were the basis of its equitable subordination claim).
276
See, e.g., Multiponics, 622 F.2d at 715-16 (holding insider
director engaged in inequitable conduct where, inter alia, insider
authorized and participated in repeated violations of a debenture
agreement between debtor and another creditor by causing debtor to
repurchase his stock and an entity in which he had an interest);
Ashinc, 629 B.R. at 219–21 (holding that insider engaged in
inequitable conduct by causing the debtor to breach a credit
agreement, giving the insider additional rights vis a vis other
creditors, but reserving for trial the amount of damages caused).
81
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 81 of 151

December 31, 2013.
277
This inequitable conduct was compounded,
they argue, by AIG inducing the Former Executives to stay at FP
and work on the winddown with the promise that FP would restore
their deferred compensation accounts by the deadline. The Court
finds ample evidence of both contentions.
There is no dispute that FP failed to even attempt to
restore the Former Executives’ account balances by December 31,
2013, as required by the Compensation Plans.
278
The Court
concludes that AIG, through Herzog and the other AIG employees
serving at FP,
279
precluded FP from taking any steps to restore
277
JX-2 § 4.01(b); CCPX-2 § 4.01(b).
278
JX-2 § 4.01(b); CCPX-2 § 4.01(b); 04/22/2025 Tr. (Allison) at
66:16–67:3 (“Q. And you never took any steps to formulate a
restoration plan, correct? A. I did not. . . . Q. So as an
employee of AIGFP, you never took any step to formulate a restoration,
not when you were the CFO or not when you were the chief accounting
officer [of FP]? A. I did not.); 04/23/2025 Tr. (Herzog) at
102:16–19 (“Q. You do not recall any effort to come up with a
restoration plan in connection with the FP deferred compensation
plans; correct? A. Not that I’m aware of.”); 04/24/2025 Tr. (Dubel)
at 144:24–145:3 (“Q. At any point when you were a board member of FP,
did the board undertake to restore - and I don’t want to know why. I
just want to know yes or no. Did the board undertake to restore
balances of the DCP? A. No, sir.”).
279
Stewart v. Wilmington Tr. SP Servs., Inc., 112 A.3d 271, 302–03
(Del. Ch. 2015), aff’d, 126 A.3d 1115 (Del. 2015) (“A basic tenet of
corporate law, derived from principles of agency law, is that the
knowledge and actions of the corporation’s officers and directors,
acting within the scope of their authority, are imputed to the
corporation itself.”). See also Hudson United Bank v. Cinnamon Ridge
Corp., 845 A.2d 417, 430-31 (Conn. App. Ct. 2004) (holding, inter
alia, that the jury could reasonably find that the bank was bound by
the terms of a handwritten agreement that its vice president executed
on its behalf).
82
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 82 of 151

the Compensation Plan accounts.
280
The Court further concludes that AIG acted inequitably by
misleading the Former Executives about FP’s intent to honor the
restoration obligation. Although AIG reflected the reductions to
the Former Executives’ accounts in AIG’s public filings and
communicated those reductions to the Former Executives,
281
the
Court finds a pattern of deception by AIG about FP’s intent to
prepare a restoration plan.
On October 9, 2008, William Dooley, an AIG employee serving
as FP’s CEO,
282
told the Former Executives that “[b]oth the DCP
and the SIP provide for the adoption of a plan for restoring
280
JX-14 at 1 (“I don’t care how it's driven, we’re not paying the
deferred comp.”); CCPX-451 at 2 (“Under no circumstances should we
restore benefits under any [deferred compensation] plan.”). See also
CCPX-233 at 17 (YE 2008 PWC rep letter for FP financials) (“[A]s of
December 31, 2008, [FP], in conjunction with management of AIG, has
reviewed the terms in the DCP and SIP and concluded that [FP] has the
contractual right to reduce its obligations under the plans as of
December 31, 2008. Management concluded that it is appropriate to
write off the deferred balances in Q3 2008 because of the significant
losses incurred by the relevant businesses and that there is no impact
on prior period financial statements.”) (emphasis added). See supra
notes 55-59, 128-32 and accompanying text.
281
JX-94 at 101 (“Due to the significant losses recognized by [FP]
during 2008, the entire amount of $563 million accrued under [FP]’s
various deferred compensation plans and special incentive plan was
reversed in the third quarter of 2008.”). See also CCPX-104 at 2
(10/9/2008 letter from Dooley to FP employees) (“The DCP and SIP
provide for the deferred compensation accounts in the plans to be
reduced by losses sustained by AIGFP. The losses will have a
significant impact on the deferred compensation accounts of AIG and
AIGFP’s participants under the DCP and SIP plans. Accordingly, I
expect that the accounts of AIG and AIGFP participants in the plans to
have substantial negative balances at the end of the current
compensation year.”).
282
See supra note 29 and accompanying text.
83
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 83 of 151

these reductions to . . . participants’ deferred compensation
amounts. . . . The formulation of a restoration plan [for the
DCP and SIP] will ultimately depend on decisions made as we wind
down [FP].”
283
On December 29, 2008, Dooley advised Compensation
Plan participants that, as a result of recent tax code changes
and to avoid immediate tax liability for the participants, FP had
amended the Plans to provide for a definitive date of payment of
any deferred compensation (namely December 31, 2013) and that the
obligation to make any payment would lapse if not made by that
date.
284
However, Dooley made no mention of the fact that FP had
already written off the deferred compensation.
285
There is
evidence that the Former Executives relied on Dooley’s statements
and remained with FP in the hope of receiving their deferred
283
CCPX-104 at 2.
284
CCPX-191 at 2 (Memorandum from William Dooley to all participants
in the Compensation Plans) (“We selected December 31, 2013 as the
payment date, with the expectation that by that point in time, the
wind-down of AIGFP will be substantially complete, and it will be
possible to determine what assets, if any, will remain available,
after satisfying the claims of creditors, to restore loss-based
reductions to accounts. As a result of the amendments, the Plans now
require payment under any restoration plan to be made on this date if
it can be made without endangering payments to senior creditors; if
payment cannot be made, the right to payment lapses.”).
285
See CCPX-153 at 3 (11/07/2008 [FP] Deferred Compensation Plans
Memo) (“Under the terms of the plans, the deferred compensation
accounts are to be reduced by losses incurred by [FP]. As discussed
in the introduction, losses at [FP] until the third quarter of 2008
have been so extensive that AIGFP’s present obligations have been
extinguished. [FP] is not expected to generate sufficient net
earnings to reverse these losses. . . . Therefore, [FP] reversed the
compensation amounts on its books as of Q3 2008 ($563 million) that
were representative of the accrued liabilities on the DCP and SIP.”).
84
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 84 of 151

compensation.
286
In addition, several of the Former Executives testified
about AIG’s efforts to claw back their retention payments that FP
was obligated to pay to the Former Executives under the ERP and
that AIG guaranteed.
287
For example, Robert Powell, a
transactional attorney at FP, testified that when FP paid him the
ERP payment for 2008, FP immediately demanded that Powell return
it, falsely telling him that he was the only one refusing to do
so and that he would face public censure if he did not repay
it.
288
When Powell refused to return any of his ERP retention
286
See CCPX-107 at 1 (10/10/2008 email from Kolbert to Dooley)
(“Also your statement that AIG intends to follow the respective plans
was I believe both appropriate and important. . . . Given the current
state of employee morale, I expect that we will see many resignations
come January.”); CCPX-120 at 1 (10/12/2008 email from Ong to Furlong)
(“At the time of opting to volunteer 50% of my 2007 bonus, we did not
know the extent of the firm’s losses and we were told at each global
call that we are doing ok. Had I know [sic] that we are in a bad
shape then I would not have volunteered my bonus to DCP 2007 as they
are my hard earned money.”); CCPX-957 (11/5/2008 email from Wayne to
Zampella) (“Both [DCP and SIP] include the concept of a restoration
obligation and interest – which Bill [Shirley] acknowledged in an
earlier note.”); CCPX-138 at 2 (11/4/2008 letter to Mauro regarding
deferred compensation, sender redacted) (“Many of us decided to stay
with Banque AIG and allow deferrals of our remuneration on the basis
of representations made to us regarding the future of [FP]. . . . We
have an express entitlement to such payments and expect Banque AIG to
abide by its obligations.”).
287
CCPX-3. See supra notes 51-54 and accompanying text.
288
04/25/2025 Tr. (Powell) at 25:25-26:8 (Q. Now, did you, in fact,
in March of 2009 receive your full 2008 ERP payment? A. I did. Q.
Okay. But at some point, do you recall being asked by [FP] to return
all or part of that payment? A. Yes. Q. Okay. When did [FP] make
that request? A. Right after they paid us.”), 26:20-27:3 (“So Bill
called me up and said that everybody above a certain compensation
level was being required to agree to give back some or all of their
pay; and that I was the last holdout, that I was going to be the only
85
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 85 of 151

payment, he was fired without cause later that year.
289
In March
2010, when Powell’s 2009 retention payment came due, FP requested
that he accept a 20% reduction.
290
When he refused, FP required
that he file paperwork and appear unrepresented at a hearing with
AIG and FP representatives who refused to pay him.
291
Powell
ultimately received only half of the funds FP withheld.
292
holdout, and that if I didn’t give the money back, or at least pledge
to do it, that I was going to - my name was going to be – I was going
to be the only holdout and that would become public. And Andrew Cuomo
was going to bring me in and put me under the bright lights.”), 28:21-
23 (“Q. Did there come a time when you learned what Mr. Shirley told
you about being the only holdout was untrue? A. Yes.”).
289
Id. at 29:14-16 (“Q. What did you ultimately decide regarding
returning all or a portion of your ERP compensation? A. I didn’t
give back any of it.”), 31:18-21 (“Q. When did your employment with
AIGFP end? A. So I was terminated in October of 2009. Q. Were you
terminated for cause or without cause? A. I was terminated without
cause.”).
290
Id. at 32:10-21 (“What happened in 2010 when your 2009 ERP
payment was due? A. So there was a program – another, you know,
give-back like program where everybody was asked to - instead of
getting paid their full ERP payment to take some discount to it. I
think it was 20 percent. . . . Q. Now, did you contest the 20
percent discount? A. I did.”).
291
Id. at 33:10-24, (“So, I gave them my tax returns, and then they,
you know, they did nothing for a long time; and then finally they said
you can come in for a hearing, but you have to come in alone, you
can’t bring a lawyer. You can’t bring anybody with you; just you and
AIG. And Gerry [Pasciucco, who was running FP at the time] told me,
we’re never going to pay you, so you can - you can do this as long as
you want, but we’re never going to pay you. You should just move on
with your life.”).
292
Id. at 35:16-22 (“Q. Thank you. At some point did you hire
counsel to assist you in resolving your dispute regarding the 2009 ERP
payment? A. Yes, Well I had hired counsel before going into the, you
know, to the meeting. I had hired counsel - it was the same counsel
that I used when they - the first time they asked me to give money
back. Q. Did you ultimately resolve your dispute over the 2009 ERP
payment with [FP]? A. I did. Q. And what resolution did you reach?
A. They ended up paying - my recollection is they ended up paying me
86
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 86 of 151

Paul Schreiner’s testimony was similar. Although FP
threatened him with public harassment too, he also refused to
return any of his 2008 retention payment and was terminated
without cause later in 2009.
293
When he later agreed to return
10% of his 2009 retention payment, he did so only after being
assured that it would not prejudice his right to get his deferred
compensation under the Compensation Plans.
294
half of it, and they agreed to cover the legal bills for getting that
half.”).
293
04/25/2025 Tr. (Schreiner) at 127:20-128:23 (“Q. Okay. At some
point, did [FP] ask you to return all or part of your 2008 ERP
payment? A. They did. Q. Okay. And when did they do that? A. It
was shortly before the payment was to be made. Q. Okay. And why did
[FP] tell you that they wanted you to give back or not give you some
of your ERP payment? A. So I think this is all public information.
But Gerry [Pasciucco] and [Andrew] Cuomo were running around
threatening people, and there was a whole thing about lists and names
and threats and ‘if you don’t, you’ll be named.” And there were both
direct threats by Gerry and indirect threats. And then Cuomo, of
course, was threatening. . . . Q. Okay. Did you ultimately return a
portion of your 2008 ERP compensation? A. I did not. . . . Q. Do
you recall when you left [FP]? A. Fall of 2009. Q. And why did you
leave [FP] in 2009? A. I was terminated. Q. Now, and were you
terminated with or without cause? A. Without cause. . . .”).
294
Id. at 129:11-130:12 (“[When the 2009 retention payments came due
in 2010] Gerry [Pasciucco] came with [Andrew] Cuomo the first time to
beat us up. He came with Ken Feinberg the second time. And Ken
Feinberg was threatening clawbacks and whatnot. Even though - it was
a bit odd because Ken Feinberg would start with, your contracts are
absolutely legal and binding but we want to take your money back
anyway. It was all fairly odd. . . . So I came back and I sat down
with Bill Shirley and someone else, I don’t recall who, and I said,
I’ll give back 10 percent. . . . He wanted me to sign it, and I had
worked with Bill for years. He was the general counsel, I think, at
the time. And I said, Bill, basically, I’m giving back the 10 percent
here, but your obligation to restore all the rights under the
contract, nothing changes here. He said, Yes, yes, yes. I signed it,
and we gave him the 10 percent. That’s my recollection.”).
87
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 87 of 151

Despite these assurances to the Former Executives, Herzog,
acting for AIG, issued specific internal instructions in 2010
that the deferred compensation balances were not to be paid or
restored under any circumstances.
295
FP did not create a
restoration plan for the deferred compensation accounts nor pay
them by the December 31, 2013, deadline.
296
The Court concludes that AIG’s executives were not honest
with the Former Executives about their intent not to pay the
deferred compensation because they feared that the Former
Executives would quit if they knew their deferred compensation
would never be restored.
297
AIG knew that the Former Executives
295
See supra notes 59 and 132 accompanying text. JX-14; CCPX-451;
JX-15 (summary of call between AIG executives and outside counsel
abandoning the recapitalization plan, warning about successor
liability, and discussing the need to determine the statute of
limitations on and claims arising under the Compensation Plans);
04/23/2025 Tr. (Herzog) at 57:11-13 (“Now, again, were you making this
statement [in JX-14, CCPX-451] and this decision in your capacity as
CFO of [AIG]? A. Yes.”).
296
See supra notes 62-63 and accompanying text.
297
04/21/2025 Tr. (Habayeb) at 112:18-22 (“Q. There was a concern
about people quitting in that time frame; correct? A. That’s
correct. And to be fair there was also at the AIG end at the time
people quitting.”); DX-59 at 159 (PwC Report on the Results of
Examination for the Year Ended December 31, 2008) (“Although a
retention plan is in place, risk of losing [key management personal]
remains probable.”); CCPX-107 (10/10/2008 email from Kolbert to
Dooley) (“Given the current state of employee morale, I expect that we
will see many resignations come January [2009]. Hopefully the
employee retention program will keep people in their seats through the
rest of the year.”); CCPX-110 (10/13/2008 email from Kolbert to
Micottis) (“Should the deferrals, SIP, or deferral portion of the ERP
be lost come the end of the year, people are going to litigate[.] It
will be a distraction to [FP] if current [FP] employees choose to
participate in litigation. In fact, it may cause folks to resign.”);
04/25/2025 Tr. (Powell) at 14:9-15 (“Q. Based on your understanding,
88
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 88 of 151

were critical to the successful winddown of the derivative
contracts and the concomitant reduction in AIG’s exposure to the
contract counterparties under its Guarantee.
298
The Court finds
these misrepresentations by AIG and its representatives
constitute inequitable conduct.
299
what was the purpose, from your perspective as an employee, of the
deferred compensation plan? A. Well, it was intended to incent [sic]
employees to stay at the business and work. . . .”).
298
DX-59 at 159 (“Certain key management personnel within the
organization have deep institutional knowledge of [FP]’s businesses,
operations and related risk exposures, which is crucial for the
effective execution of the wind down plan and managing the risks
associated with the process. Although a retention plan is in place,
risk of losing these individuals remains probable.”); CCPX-255 at 7-8
(03/14/2009 letter from Chair and CEO of AIG, Liddy, to Secretary of
the Treasury, Geithner, enclosing memo regarding FP’s retention plan)
(“[FP]’s books also contain a significant number of complex - so-
called bespoke - transactions that are difficult to understand and
manage. This is one reason replacing key traders and risk managers
would not be practical on a large scale. Personal knowledge of the
trades and the unique systems at [FP] will be critical to an effective
unwind of [FP]’s businesses and portfolios.”); CCPX-558 at 1-2
(07/15/2011 letter from Pasciucco to Benmosche) (“I could not have
[successfully wound-down FP] without the global group of hard working
and diligent employees who worked in good faith to wind-down FP in a
manner consistent with the objectives of reducing the risks to the
overall AIG Group and paying back the taxpayer. As they have done so,
they have put themselves out of work.”); 04/23/2025 Tr. (Herzog) at
14:3-8 (“In [sic] it was the employees of [FP] who, in my view, best
suited to organize and initiate unwinding the trades, because they
were the ones who were most familiar with them, as they put the trades
on or at least were familiar with the origins of the various trades
and were the people in the market, so to speak, facing off with the
various counterparties.”), 63:12-18 (“Q. And I think you testified on
direct that folks like Jon Liebergall were important, if not vital, to
the derisking efforts of the winddown, fair? A. That is correct. Q.
Fair to say that in 2010 FP was still managing positions that
required skilled traders like Mr. Liebergall? A. I believe that to
be true.”); 04/21/2025 Tr. (Habayeb) at 151:25-152:3 (“Q. AIG itself
lacked the institutional knowledge to wind down a book of trades as
complex as FP’s; right? A. Yeah.”).
299
Ashinc, 629 B.R. at 217-18 (listing domination and exploitation
of the debtor as an example of inequitable conduct by an insider).
89
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 89 of 151

c.Lending Funds instead of Recapitalizing FP
i.Advances during the Financial Crisis
The Former Executives also assert that the actions of AIG in
advancing funds to FP during and after the financial crisis in
the form of loans instead of equity contributions allowed AIG to
advance its interests to the detriment of the Former
Executives.
300
The funds advanced by AIG were used by FP
primarily to avoid a default on FP’s derivative contracts, which
would have resulted in hundreds of billions of dollars in
liability for AIG.
301
The Former Executives argue that an equity
contribution would have provided the same benefit, without
elevating AIG to the status of a creditor superior to the Former
300
See, e.g., Summit Coffee Co. v. Herby’s Foods, Inc. (In re
Herby’s Foods, Inc.), 2 F.3d 128, 132 (5th Cir. 1993) (“For example,
if an insider makes a loan to an undercapitalized corporation, the
combination of undercapitalization and the insider loan may allow the
bankruptcy court to recharacterize the loan as a capital contribution,
or to equitably subordinate the loan to the claims of other
creditors.”); Café Crème, Ltd. v. LeRoux (In re Le Cafe Creme, Ltd.),
244 B.R. 221, 236 (Bankr. S.D.N.Y. 2000) (subordinating shareholders’
secured claims because the shareholders converted their equity
interests into secured debt when the debtor was insolvent).
301
04/25/2025 Tr. (Liebergall) at 59:7-16 (“Q. Did you have an
understanding as to whether the parent could avoid a cross-default by
just posting collateral on AIG FP’s behalf? A. I have an
understanding. Q. What is your understanding? A. That that would
not be a solution. As I mentioned to you before, the contracts were
with FP. FP had to make payments. If FP failed to make payments,
then an event of default and potential - and cross-defaults were what
we were looking to avoid.”). See also DX-4 (AIG Guarantee covering FP
obligations to third parties); DX-394 ¶ 21 (Imburgia Report) (as of
September 30, 2008, “AIG reported that AIGFP’s net notional exposure
on its super senior CDS portfolio was $377 billion.”).
90
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 90 of 151

Executives’ claims in the event of a bankruptcy filing.
302
They
contend that this conduct was inequitable.
While failing to adequately capitalize a subsidiary (or
loading it with debt) can be inequitable conduct,
303
the Court
concludes that AIG’s actions in 2008 do not constitute
inequitable conduct. AIG and FP’s sole source of liquidity
during the financial crisis, the Fed Revolver, precluded AIG (in
the absence of a waiver) from making an equity contribution to
FP.
304
Given the climate in 2008 and 2009, asking for a waiver to
302
See 06/11/2012 Herzog Dep. at 429:4-22 (“Q. In that case, Mr.
Herzog, tell me what the factors were that – as far as you understand,
led the company to decide to extend the funding to FP in the third
quarter in the form of a loan, as distinguished from, in whole or in
part, as capital? A. My recollection for the rationale for a loan
versus capital, which we could have just as easily made some of all of
it equity, so, it – again, there’s no — there’s - there’s nothing
complicated about was it loaned [sic] – you know, cash goes in, and as
either you account for it as an equity contribution [sic], which you
could just as easily put it in as a loan and made a – and we’ve done
this from time to time – made non-cash equity contributions in the way
of loan forgiveness.”). See also JX-2 § 4.01(a); CCPX-2 § 4.01(a).
303
See, e.g., Winstar, 554 F.3d at 412-13 (subordinating insider
claim where insider had legal right to issue refinancing notice at its
sole discretion but deliberately delayed doing so to conceal debtor’s
poor financial condition and to induce other creditors to provide
funds to the debtor). See also Herby’s Foods, 2 F.3d at 132–33
(opining that an insider loan to an undercapitalized corporation may
be grounds to equitably subordinate the loan to the claims of other
creditors); Lordstown Motors Corp. v. Hon Hai Precision Industry Co.,
Ltd. (In re Nu Ride Inc.), No. 23-10831 (MFW), 2024 WL 4376130, at *22
(Bankr. D. Del. Oct. 1, 2024) (“unfair conduct. . . includes where the
insider or fiduciary[,] . . . if a controlling stockholder,
undercapitalized the debtor or capitalized the debtor with debt.”)
(citation omitted).
304
DX-26 § 6.04(a). See also 04/23/2025 Tr. (Herzog) at 48:17-20
(“And I don’t know if we had to get approval or their non-disapproval
but it was - we couldn’t do - we, the parent company, couldn’t do
activities like [recapitalization] without [the Fed’s] approval or
knowing that they wouldn’t object to it.”).
91
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 91 of 151

provide FP with equity could have drawn severe criticism and been
denied.
305
Therefore, the Court concludes that AIG’s decision to
use the form of a loan to advance funds to FP in 2008 was not
inequitable conduct done with any malice towards the Former
Executives.
306
ii.2010 Recapitalization Plan
The Former Executives assert nonetheless that AIG planned to
recapitalize that loan in 2010
307
but rejected that plan only
because it could have obligated FP to restore the Former
Executives’ rights under the Compensation Plans.
308
FP responds
that AIG had no obligation to recapitalize the FP Revolver and
its decision to abandon the recapitalization plan was grounded in
rational financial reasoning.
The Court concludes that AIG’s decision not to recapitalize
was inequitable.
309
The Court concluded above that AIG’s 2010
305
See supra note 143 and accompanying text. See also 04/25/2025
Tr. (Powell) at 26:20-27:3 (describing public sentiment and threats
against the Former Executives by AIG executives, Andrew Cuomo, and Ken
Feinberg); 04/25/2025 Tr. (Schreiner) at 129:11-130:12 (same).
306
The Court concludes only that it was not inequitable for AIG to
use the form of a loan to comply with the terms of the Fed Revolver.
As the Court held above, the true intent of AIG in 2008 was to make a
capital contribution to FP rather than a loan. See supra Part A.
307
See supra notes 57-58 and accompanying text.
308
See supra notes 59, 132 and accompanying text.
309
See, e.g., Winstar, 554 F.3d at 412 (subordinating insider claim
where insider had legal right to issue refinancing notice “at its sole
discretion” but deliberately delayed issuing notice to conceal
debtor’s poor financial condition to detriment of other creditors);
Herby’s Foods, 2 F.3d at 132–33 (“if an insider makes a loan to an
92
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 92 of 151

plan to recapitalize the FP Revolver reflected AIG’s view that
the FP Revolver was, in substance, an equity contribution.
310
While Herzog testified that the recapitalization plan was
only an effort to simplify financial reporting and that he had no
intent to affect the Compensation Plans one way or the other,
311
the Court found that testimony unconvincing. The contemporaneous
emails show an original intent to restore FP to financial health,
including a request that the Fed authorize the recapitalization
plan.
312
The evidence is also clear that AIG only aborted the
undercapitalized corporation, the combination of undercapitalization
and the insider loan may allow the bankruptcy court . . . to equitably
subordinate the loan to the claims of other creditors.”) (further
citation omitted); Multiponics, 622 F.2d at 715–22 (finding that
controlling insider acted inequitably by causing debtor to breach its
debenture agreement with non-insider creditors); Nu Ride, 2024 WL
4376130, at *22 (“unfair conduct . . . includes where the insider or
fiduciary[,] . . . if a controlling stockholder, undercapitalized the
debtor or capitalized the debtor with debt.”) (emphasis and internal
quotations omitted).
310
See supra notes 128-51 and accompanying text.
311
04/23/25 Tr. 57:14-22 (Herzog) (“Q. And by saying you wanted ‘no
effect on the comp plans one way or another,’ what were you saying?
A. I think it’s self-evident what I was saying, ‘no effect on comp
plans one way or another,’ up, down, good, bad. This is an
undertaking to simplify segment reporting that shouldn’t have either a
windfall or a penalty associated with it. So, one way or another, I
was not in favor and said “no” to anything that affected the comp
plans based upon a segment reporting simplification undertaking.”).
312
JX-7 (06/03/2010 email from Gender to Herzog) (stating that “We
need to get the following done soonest. 1) Recapitalize FP to
eliminate the inter-company debt.”); JX-12 (07/21/2010 email chain
explaining the recapitalization, via book entries, to eliminate FP’s
negative equity because “[i]t is not expected that FP will be in a
position to meet its obligations under the [FP Revolver].”); JX-13 at
3 (07/26/2010 Fed Funding Request: Business case and supporting
computations) (“In order to further facilitate the unwind process and
correctly reflect the amount collectable from [FP], it is proposed to
eliminate the negative equity in [FP].”); JX-11 at 4-5 (07/27/2010
93
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 93 of 151

plans to recapitalize FP when AIG learned that FP might become
solvent and have to restore the Former Executives’ Compensation
Plan accounts.
313
Although Herzog was a Director of FP at that
time, he made the decision not to recapitalize FP in order to
advance the interests of AIG and its shareholders alone.
314
email attaching draft slide deck of the plan to recapitalize FP,
explaining that the plan intends to “facilitate the unwind process” at
FP which is expected to “transfer management of its assets to AIG Inc
by early 2011” and to “correctly reflect the amount collectable from
AIGFP”).
313
JX-14 at 2 (“If the proposed recapitalization substitutes equity
for debt, thereby creating a solvent FP with assets that could fund a
restoration plan, there is a significant risk that at some point prior
to the expiration of the limitations period, FP will face breach of
contract litigation demanding compliance with the restoration plan
obligation. . . . This would represent a potential $600 million
liability of the worst sort[.]”); id. at 1 (09/01/2010 response from
Herzog to Rielly and Gender) (“I don’t care how it’s driven, we’re not
paying the deferred comp.”); CCPX-451 at 2 (09/02/2010 email from
Herzog to Leahy) (“Under no circumstances should we restore benefits
under any [deferred compensation] plan.”); JX-15 at 2 (September 7,
2020, memo from Reilly to Herzog summarizing decisions made on
September 3 conference call, including to reduce the “current
recapitalization proposal by an amount large enough so that
indebtedness to more senior creditors (DCP/SIP plans are secondary to
all other creditors) is greater than any AIGFP ‘end of business’ cash
flow projection.”) (emphasis in original); id. at 3 (“There is also a
clause in the plan agreement that if at some point AIG were to
‘transfer all or substantially all assets’ to another entity then the
contract would be legally binding for the new entity and could
potentially re-establish the liability. It is important to make sure
participants in the [FP] ‘transition’ are aware of this fact and that
no actions trigger the re-establishment of the DCP/SIP plan
liability.) (emphasis added); JX-18 at 3 (09/16/2010 email from Reilly
to FP Executives) (“1) We will move forward with the re-capitalization
related to the tax balance in the amount of $18,455,480,000. . . . The
remaining intercompany borrowings will stay on the balance sheet.”)
(emphasis in original).
314
04/23/2025 Tr. (Herzog) at 55:16-17 (“I would have made [the
recapitalization] decision as AIG’s chief financial officer.”), 56:20-
23 (“If there was a commercial reason, i.e., it was good for AIG
shareholders, then you’d have to consider [recapitalizing FP] but I
couldn’t think of any then and haven’t been able to think of any
94
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 94 of 151

FP argues that AIG’s decision not to recapitalize FP was a
rational financial decision that avoided incurring a potential
obligation of $600 million to the Former Executives. The Court
rejects that argument. The potential $600 million obligation is
de minimis in comparison to the interest expense FP continued to
incur because AIG did not recapitalize the FP Revolver. At that
time, FP was paying $400-500 million per quarter in interest
obligations to AIG.
315
FP ultimately incurred more than $6
billion in interest expense after the recapitalization plan was
aborted in September 2010.
316
While some of that interest was
paid in kind,
317
it nonetheless increased the amount of debt FP
owed to AIG, to the detriment of FP and its other creditors.
Therefore, the Court finds that AIG’s decision not to
recapitalize the FP Revolver was contrary to AIG’s original
intent in making the advances, was done with an intent to benefit
itself and to harm FP and the Former Executives, and had no
financial benefit for FP. Therefore, the Court concludes that
this conduct was inequitable and supports the equitable
since.”); 04/21/2025 Tr. (Habayeb) at 124:17-20 (“I can tell you the
motivation behind not forgiving any portion of the loan was that you
would put the AIG shareholder at the disadvantage, and they would get
less of a recovery than not forgiving the loan.”).
315
JX-86.
316
Id.
317
Id. (listing almost $5 billion of the $11 billion in interest as
capitalized – i.e., paid in kind).
95
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 95 of 151

subordination of AIG’s claim.
318
d.Timing of Bankruptcy Filing
The Former Executives also contend that FP timed its
bankruptcy filing in 2022 to injure them.
319
The Former
Executives assert that the bankruptcy filing in 2022 was AIG’s
last step in its efforts to deprive the Former Executives of
their rights under the Compensation Plans. Because AIG had lent
funds, rather than capitalize FP appropriately, the bankruptcy
filing subordinated their deferred compensation claims to the $37
billion due under the FP Revolver on the Petition Date. Because
the winddown had successfully extricated FP (and AIG) from most
of FP’s derivative contracts (and their related obligations), the
Former Executives argue that there was no purpose for the filing
other than to eliminate the claims of the Former Executives.
They assert that the filing was not intended to repay AIG’s $37
billion claim. In fact, the proposed Bankruptcy Plan provides
that AIG will receive 100% of the equity of FP in exchange for
318
See, e.g., Winstar, 554 F.3d at 397, 412-13 (finding an insider’s
conduct inequitable where it forced the debtor to purchase unneeded
equipment from the insider, creating unnecessary debt).
319
See, e.g., Off. Comm. of Unsecured Creditors v. Credit Suisse
First Boston (In re Exide Techs., Inc.), 299 B.R. 732, 746 (Bankr. D.
Del. 2003) (denying motion to dismiss equitable subordination claim
where complaint alleged insider, inter alia, “delay[ed] the filing of
the [debtors’] bankruptcy petitions (and [chose] which debtors would
file) in order to protect its liens and collateral from avoidance
attack”).
96
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 96 of 151

that entire claim.
320
The outcome of the Bankruptcy Plan is what
AIG would have received had it completed the recapitalization
plan in 2010. However, the proposed Plan provides that the
Former Executives will receive only a pro-rata share of $1
million if their class accepts the Plan.
321
The Court disagrees with the argument of the Former
Executives. Waiting to file until the derivative contracts had
been wound down or novated to Matched Funding not only benefited
AIG, but benefited all creditors, including the Former
Executives, by allowing FP to avoid defaulting on its derivative
contracts and incurring potentially hundreds of billions in
liabilities.
322
The Court has already concluded that the 2022
bankruptcy filing was not a bad faith filing when it denied the
Former Executives’ motion to dismiss the case.
323
Therefore, the
Court concludes that the filing of the bankruptcy case in 2022
was not inequitable.
320
D.I. 6 at 16, 21.
321
Id. at 17.
322
Compare JX-53 at 3 (06/15/2022 Draft A&M presentation to the
Special Committee) (showing potential losses of $510 million if FP
retained the derivatives and filed for bankruptcy versus a cost of
only $5 million if FP novated the derivatives) with DX-394 ¶ 21
(Imburgia Report) (as of September 30, 2008, “AIG reported that
AIGFP’s net notional exposure on its super senior CDS portfolio was
$377 billion.”).
323
In re AIG Financial Products Corp., 651 B.R. 463, 469-74 (Bankr.
D. Del. 2023).
97
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 97 of 151

e.Transferring FP’s Assets
The Former Executives also assert that AIG acted inequitably
by causing FP to transfer numerous assets for the benefit of AIG
shortly before FP filed bankruptcy in 2022, including (i)
eliminating $33.6 billion of investments in FP’s subsidiaries,
324
(ii) novating 94 derivative contracts, and transferring $648
million in bonds and $35 million in cash related to those
contracts, to Matched Funding,
325
(iii) paying unnecessary
interest on the FP Revolver caused by AIG’s delay in offsetting a
tax receivable it owed to FP against the FP Revolver,
326
and (iv)
AIG’s retention of $127 million of FP’s funds held in the
intercompany cash pool.
327
i.Offsets between FP and its Affiliates
The Former Executives complain that FP dissipated $33.6
billion of investments in its subsidiaries when FP offset its
equity in those subsidiaries against the amounts it owed to those
subsidiaries.
328
They argue that those transactions benfited AIG
324
See supra notes 71-72 and accompanying text.
325
See supra notes 73-75 and accompanying text.
326
See infra note 348 and accompanying text.
327
See supra notes 77-81 and accompanying text.
328
See supra notes 71-72 and accompanying text.
98
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 98 of 151

by saving it from honoring its Guarantee. For example,
329
they
argue that Pinestead (an FP subsidiary) could have called on the
AIG Guarantee to pay the account payable that FP owed to it
resulting in an additional $30.7 billion in assets at Pinestead,
which it could have upstreamed to its parent, FP.
330
However, the
Former Executives’ expert acknowledged that FP could have used
the funds it got from Pinestead to repay AIG which would have had
the same effect as the offsetting transactions FP made.
331
The Court concludes that the offsetting transactions were
not inequitable conduct of AIG. First, AIG did not direct FP to
do those transactions; the Special Committee did.
332
Second, the
329
All of the offset transactions were similar to the Pinestead
transaction. 04/24/2025 Tr. (Kosturos) at 19:7-13; 04/22/2025 Tr.
(Allison) at 42:4-6; 04/28/2025 Tr. (Avery) at 62:15-22.
330
See JX-50 at 2-3 (Allison’s memo describing the Pinestead offset
in detail); 04/22/2025 Tr. (Allison) at 74:21–75:4 (“Q. Right. Now,
that liability that FP owed to Pinestead was subject to the general
guarantee provided by [AIG], right? A. The - Pinestead had a – would
have had the ability to draw - to call on the guarantee of [AIG], for
the amounts owed to it by FP. Q. Which at the time of this memo was
approximately $30.7 billion? A. Approximately.”).
331
04/28/2025 Tr. (Avery) at 60:9-21 (“Q. Okay. And from FP’s
perspective, in your view, is there any difference between doing the
journal entries they actually did versus the ones we just walked
through, based on Mr. Allison’s testimony? A. No. These are the
same journal entries that Mr. Allison entered into when reducing the
asset by $30 billion and removing $30 billion from AIGFP. The
difference is, by calling on the guarantee, AIGFP would have been left
with $30 billion in cash, either for the bankruptcy proceedings, or it
would have resulted in a transfer to AIG, Inc. of $30 billion, both of
which reflect this decrease in $30 billion of assets from the
investment subsidiary that was executed by the elimination entries.”).
332
See supra notes 70-72 and accompanying text.
99
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 99 of 151

transactions did not transfer any asset away from FP.
333
FP
simply offset an amount it owed to its subsidiaries against
amounts they owed to it or against its equity in them.
334
FP’s
balance sheet was simplified but FP’s net equity remained the
same.
335
The fact that the offsets may have provided an indirect
333
04/22/2025 Tr. (Allison) at 38:8-10 (“Q. So did FP transfer any
assets away from FP in this transaction? A. No.”), 42:7-16 (“Q. Did
any of [the offset transactions] involve a transfer of assets from FP?
A. No. Q. So, for instance, one of them was a $2 billion
transaction involving Matched [Funding]. Do you recall that, sir? A.
Yes. Q. Did that Matched [Funding] offset transaction involve a
transfer of assets from FP? A. No. Q. Did it involve a transfer of
assets from Matched [Funding]? A. Yes.”); 04/24/2025 Tr. (Kosturos)
at 20:4-6 (“Q. Did FP transfer away any assets or value in any
intercompany offset transaction? A. No, they didn’t.”); 04/24/2025
Tr. (Dubel) at 112:1-8 (“Q. In any of the intercompany offset
transactions, did FP transfer away any assets? A. No, we had – w
[sic] took a receivable in and offset that against the equity. But it
wasn’t an asset because it was a payable on our balance sheet. And by
getting that sent to us, it offset the equity. So it stayed all
within the liability and equity side of the balance sheet, not on the
asset side.”), 112:19-22 (“Q. And based on your years of
restructuring experience, is this kind of intercompany offset
transactions [sic] rare or uncommon in a company that’s restructuring?
A. No, it’s not uncommon at all.”).
334
See also JX-66 at 1 (09/27/2022 memo entitled “DRAFT –
Intercompany Offset Journal Entries”) (“From FP’s perspective the
settlement of the intercompany balances primarily nets payables to
subsidiaries on the books of FP against the investments of FP in the
same subsidiaries.”).
335
04/24/2025 Tr. (Kosturos) at 20:7-15 (“Q. Did any of the
transactions change the net equity of FP on either a standalone or
consolidated basis? A. No. Q. Was there a benefit to FP from doing
these intercompany offset transactions? A. Yes. Q. And what was
it? A. First of all, to clean up its balance sheet and to make a
more fair representation of its balance sheet.”); 04/24/2025 Tr.
(Dubel) at 112:9-11 (“Q. Did any of the intercompany offset
transactions change the net equity of FP? A. No.”); 04/22/2025 Tr.
(Allison) at 39:10-13 (“Q. The second purpose listed is ‘no loss
value to FP.’ What does this mean? A. That means there’s going to
be no change in FP’s equity.”). See also JX-66 at 1 (“There is no
change in the equity of FP from these settlements on either a
standalone or consolidated basis and these transactions do not impact
100
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 100 of 151

benefit to AIG is immaterial.
336
Therefore, the Court concludes
that the offsetting transactions done by FP in 2022 did not
constitute inequitable conduct by AIG.
ii.Novations to Matched Funding
In early 2022, FP had only 97 derivative contracts left in
its portfolio. FP terminated three of the contracts
337
and
to [sic] the value of FP. There is no gain or loss to FP or its
subsidiaries from these intercompany settlements.”).
336
JX-66 at 1 (“Due to the current size of these intercompany
balances (in excess of $750 million), any potential default on these
intercompany payables between FP and its subsidiaries could have the
potential effect of triggering a default under the terms of [AIG]’s
credit agreement dated November 21, 2021. These offsetting journal
entries will assist in bringing the intercompany balances below the
$750 million threshold and eliminate the potential for any default.
FP believes that completing the proposed transactions, and thereby
reducing the risk of potential cross-default under the [AIG] loan
agreement, is prudent given that (1) [AIG] is both the sole equity
owner of FP and its largest creditor pursuant to the [FP] Revolving
Credit Agreement and (2) [AIG] is likely the only funding source for
FP since FP’s cash is within the control of [AIG]. FP further
understands that [AIG] supports the proposed transactions, and FP
believes it is prudent and appropriate to take into account the
viewpoints of [AIG] as its largest creditor and sole stockholder.”).
See also 04/22/2025 Tr. (Allison) at 39:17–21 (“We’re discussing [in
JX-66] that the intercompany balance amounts, if FP were to file for
bankruptcy and there were large intercompany balances in excess of a
certain amount, that could lead to [AIG] being in default of its
obligations under certain loan agreements.”); 04/24/2025 Tr. (Dubel)
at 109:12-110:2 (testifying that the offsetting transactions allowed
AIG to avoid cross default and keep FP’s options open).
337
04/23/2025 Tr. (Stubbs) at 118:17-19 (“Q. You mentioned the 94
contracts that were novated. How many contracts did FP terminate
instead of novating? A. Three.”); 04/24/2025 Tr. (Dubel) at 114:21-
115:6 (“We should look at those contracts that it made sense to enter
into termination negotiations and discussions with. These contracts
had a lot of volatility. And so, you know, even to this day, these
types of contracts, as the market swings, as interest rates move, as a
variety, you know, as currencies move, it can have a lot of
volatility. So if we could eliminate some of that volatility and
bring back collateral that we have that was good for us, yes, we might
have to pay a little bit to get that done. But we looked at it from
101
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 101 of 151

novated the remaining 94 contracts to one of its subsidiaries,
Matched Funding, which already had a similar asset portfolio.
338

As part of that transaction, FP also transferred associated bonds
and cash collateral to Matched Funding.
339
The bonds and cash
provided liquidity that Matched Funding would need to service the
derivative contracts.
340
In exchange, FP received an offset of an
that cost benefit analysis.”).
338
See supra note 73 and accompanying text. 04/23/2025 Tr. (Stubbs)
at 117:24-118:1 (“Q. And so how many derivative contracts did FP end
up novating? A. In the end, we novated 94 of the 97.”), 123:9-124:20
(“Q. And why were most of the derivatives novated to Matched
[Funding]? A. That was a logical place to put the remaining FP
derivatives. Matched Funding had liabilities that go out to 2040-plus
as a portfolio that’s a, you know, established portfolio in the
company. Q. And to be clear, was Matched [Funding] an FP subsidiary?
A. Yes. Q. And then I see if you were novated to Markets, was
Markets an FP subsidiary? A. No. Q. So why did FP novate, you
know, this handful of derivatives to Markets instead of Matched
[Funding]? A. So for those derivatives, the counterparties were
banks. Banks have, you know, a lot of regulatory requirements placed
on them. . . . . So we leveraged the fact that we had ISDAs and CSAs
in place with [M]arkets . . . so that’s why we . . . asked them to
face AIG Markets. Q. So for the ones that were novated to Markets,
did Markets keep the economic value of the derivative contracts? A.
No. Q. So what happened to the economic value? A. So we - we
novated the derivative where FP was facing Markets to AIG Matched
Funding facing Markets so Markets was a pass-through. . . . Q. So
what entity ended up with all the economic value from the derivative
contracts? A. AIG Matched Funding.”).
339
See supra notes 74-75 and accompanying text.
340
Id. See also 04/24/2025 Tr. (Kosturos) at 31:8-23 (“Q. Why did
FP transfer that [$35 million] to Matched [Funding]? A. We wanted to
put additional liquidity at Matched Funding so that they, again, could
have adequate liquidity based on some of the ranges that we thought
might happen over the next 12 to 18 months. Q. Was it in FP’s best
interest to transfer that receivable to Matched [Funding]? A. Yes.
Q. And again, why? A. Because if Matched [Funding] doesn’t have
enough liquidity, they could have a potential default. And we have
seen that the range of potential defaults already in the previous
analysis. So that was not an outcome we could accept. So we wanted
to make sure that there was adequate funding that they could
102
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 102 of 151

intercompany liability it owed to Matched Funding.
341
The Former Executives contend that those transfers benefited
AIG by allowing it to put FP into bankruptcy without causing an
event of default of those derivative contracts thereby avoiding
collateral calls in the hundreds of millions of dollars which AIG
would have had to honor.
342
effectively live on their own liquidity for as long as they needed
to.”); 04/28/2025 Tr. (Avery) at 70:7-11 (“Q. And now what is your
understanding why FP held bonds? A. The bond portfolio was used by
FP to post collateral against derivatives.”).
341
See supra note 75 and accompanying text. See also JX-78
(10/31/2022 Unanimous Written Consent in Lieu of Meeting of Directors
of AIG Financial Products Corp.) (approving transfer of $35 million in
cash to Matched Funding in partial satisfaction of payable owed by FP
to Matched Funding); 04/22/2025 Tr. (Allison) at 44:5-10 (“Q. And why
did FP transfer bonds to Matched [Funding]? A. To settle a portion
of its intercompany liability to Matched Funding. Q. So did FP lose
any value as a result of these bond transfers? A. No.”); 04/24/2025
Tr. (Kosturos) at 30:2-6 (“Q. Did FP receive fair value for the bond
transfers to Matched [Funding]? A. Yes, it did. Q. Did the bond
transfers negatively impact FP’s value? A. No.”), 32:10-12 (“Q. Did
FP receive fair value for the transfer of that [$35 million]
receivable to Matched [Funding]? A. Yes, it did.”).
342
See, e.g., JX-53 at 4 (6/15/2022 draft presentation to the
Special Committee) (“These novations are being conducted to prevent a
potentially large value loss (previous estimates show potential losses
of up to $510 million) resulting from counterparty terminations upon
an event-of-default (bankruptcy)”). See also 04/23/2025 Tr. (Stubbs)
at 169:2–21 (“Q. And your understanding was the counterparties’ right
to terminate would be unilateral if those derivative contracts were
still at FP and they filed for bankruptcy; right? A. Yes. Q. AIGFP
would be the defaulting party on those contracts; right, sir? A.
Correct. Q. And you said AIG would have no rights in that
circumstance; right? A. AIGFP would have no rights in those
circumstances, yeah. Q. Right. And you estimated that those losses
on those terminations could have been anywhere between $100 million
dollars and a billion dollars, right, sir? A. Yeah. So the ranges -
yeah. I didn’t know what a max range was. So it could be 500. It
could be a billion. It could be 2 billion, to be honest. So, yeah,
it - it’s something we couldn’t estimate, which was part of the
challenge; right? So there’s unlimited potential loss. Yeah. So
various ranges I used over time.”); 04/24/2025 Tr. (Kosturos) at
103
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 103 of 151

The Court concludes, however, that those transfers did not
harm FP or its creditors. Matched Funding was a subsidiary of
FP.
343
Therefore, the Court finds that the transfer of the
derivatives and other assets from FP to Matched Funding did not
diminish FP’s net value.
344
It is true that AIG benefited
20:24-21:3 (“[I]f FP did file Chapter 11, that under the safe harbor
rules, the counterparties would be able to declare an event of default
and then exercise their termination rights, which would result in a
sizable loss to FP.”); 04/24/2025 Tr. (Dubel) at 113:25-114:6 (“I knew
from my experience that if you didn’t deal with [the derivative
contracts] in the appropriate manner, that it could cause harm to the
company, to the estate. Number one, if we were to propose a plan
that included a Chapter 11, then these contracts would fall under the
safe harbor provisions of the Bankruptcy Code. If you ask me what
code section, I don’t know. I just know that the concept there.”).
See 11 U.S.C. § 362(b)(7) (the automatic stay does not stay the
exercise of any right of a party to a securities contract, including
the right to terminate the contract and offset its claim against any
collateral it holds or obligations it has under the contract), §
546(e) (precluding a debtor from avoiding any “transfer made by or to
(or for the benefit of) a . . . financial institution . . . in
connection with a securities contract. . . .”), § 560 (authorizing
counterparties to liquidate, terminate, or accelerate swap agreements
in the event of a bankruptcy filing).
343
04/23/2025 Tr. (Stubbs) at 123:15-16 (“Q. And to be clear, was
Matched [Funding] an FP subsidiary? A. Yes.”); 04/28/2025 Tr.
(Avery) at 153:23-154:1 (“Q. You’d agree that Matched [Funding] is a
wholly owned subsidiary of FP. So, any derivatives at Matched
[Funding] remained within the FP corporate family, right? A. They
went to a subsidiary of [FP], yes.”).
344
04/24/2025 Tr. (Kosturos) at 27:15-20 (“Q. How was FP’s balance
sheet affected by these derivative novations? A. The net equity
position was not affected as the balance sheet derivatives were
transferred through the intercompany account with Matched Funding, who
is a 100 percent wholly owned subsidiary.”), 30:5-6 (“Q. Did the bond
transfers negatively impact FP’s value? A. No.”), 32:10-12 (“Q. Did
FP receive fair value for the transfer of that receivable to Matched
[Funding]? A. Yes, it did.”), 37:8-25 (“Q. Did each transaction
benefit FP first and foremost? A. Yes. Q. And based on your 30
years of restructuring experience, did FP make the right decision in
undertaking each intercompany offset transaction, each novation and
termination of a derivative contract, and each related bond and cash
transfer to Matched [Funding]? . . . A. Yes. Q. Why? A. Because
104
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 104 of 151

indirectly from the transfers, by not being required to cover the
obligations arising from defaults on the derivative contracts if
they were still held when FP filed bankruptcy.
345
However, FP
benfited in the first instance because it avoided those losses
itself.
346
In addition, AIG did not cause FP to transfer the
assets in question to Matched Funding, the Special Committee
all of the - all of the transactions that you have asked about all
benefited FP to either maintain or increase the value of the entity,
thereby benefiting creditors in whatever waterfall that those
creditors are due to be paid on.”); 04/24/2025 Tr. (Dubel) at 116:21-
117:2 (“Q. Did any of these novations or terminations have an impact
on the value of FP? A. No, they did not. Because all we did is we
took the value of those contracts, and we moved them to one of our
subsidiaries, a wholly owned subsidiary. So all we did was transfer
that value into a subsidiary, which ends up in our pocket at the end
of the day.”), 119:9-10 (“Q. And did those transfers negatively
impact FP’s value? A. No, they did not.”); 04/23/2025 Tr. (Stubbs)
at 125:7-9 (“Q. And what net impact did the pre-petition novations
have on FP’s value balance sheet? A. No impact.”).
345
11 U.S.C. §§ 362(b)(7), 546(e) & 560. See also 04/23/2025 Tr.
(Stubbs) at 126:1-2 (“Q. So was any derivative contract novated to
[AIG]? A. No.”); DX-4 (AIG Guarantee).
346
04/24/2025 Tr. (Dubel) at 117:3-14 (“Q. Who primarily benefited
from the novations and terminations? A. We did at FP. Q. Why? A.
Because as I said, we wanted to be able to have all alternatives
available to us when we ultimately came down to what the restructuring
decision was. And by eliminating the risk of loss of asset value and
the avoidance of any potential liabilities being created, that was a
huge benefit to FP and ultimately to its creditors, whomever, wherever
the waterfall fell with our creditors, it was a huge benefit to those
- to those creditors.”); 04/24/2025 Tr. (Kosturos) at 27:21-25 (“Q.
Who primarily benefited from the derivative novations? A. Primarily
FP. Q. How so? A. It avoided the potential loss of holding those
positions. So the $160 million to $510 million loss ranges.”); JX-53
at 3 (6/15/2022 A&M presentation to the Special Committee showing
losses to FP up to $510 million if the derivatives were allowed to
default).
105
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 105 of 151

did.
347
Therefore, the Court concludes that there was no
inequitable conduct by AIG in the actions of the Special
Committee in causing FP to novate the derivative contracts and
related cash and bonds to Matched Funding.
iii.$18.5 Billion Tax Receivable Offset
The Former Executives also argue that AIG acted inequitably
by delaying the payment or offset of a tax receivable AIG owed to
FP thereby causing FP to pay additional interest on the FP
Revolver.
348
The Court agrees with the Former Executives. In September
2010, during the recapitalization discussions, AIG acknowledged
that it owed FP approximately $18.5 billion under the parties’
tax sharing agreement for losses suffered by FP in 2008.
349
It
347
See supra notes 73-75 and accompanying text. See also 04/24/2025
Tr. (Dubel) at 119:6-8 (“Q. Did AIG direct FP to transfer the bonds
or cash receivable to Matched [Funding]? A. They did not.”).
348
CCPX-677 (Mark Balfan 2018 UK Trial Day 3 Tr. 17:7–17 (“AIG owed
[FP] $18.5 billion because AIG received the tax benefit of our loss.
So AIG files a consolidated tax return. When [FP] suffered the
massive losses in 2008, naturally [AIG] received a tax credit for 35
per cent of that loss. That tax credit was owed to [FP]. So what was
described to me is rather than having an $18.5 billion payable to FP
and a $55 billion payable from FP to AIG, we should simply net the two
down so that all we had was a smaller payable from FP to the
parent.”); JX-15 at 2 (acknowledging that AIG has a tax liability of
approximately $18.5 billion owed to FP); 04/22/2025 Tr. (Allison) at
25:23-26:4 (“Q. And to be clear, was there a tax-sharing agreement
between AIG, Inc. and FP? A. There was. Q. What did it provide
about whether AIG, Inc. had to pay for using FP’s tax assets? A. It
generally provided that AIG, Inc., would pay for using the tax
attributes of its subsidiaries.”).
349
JX-15 at 2; JX-18 (09/16/2010 email from Reilly to Shirley and
others) (“We will move forward with the [offset of] the tax balance in
the amount of $18,455,480,000.”).
106
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 106 of 151

also acknowledged that if AIG allowed FP to set off that
receivable against the FP Revolver, it would reduce FP’s interest
expense.
350
Nonetheless, AIG did not allow FP to offset that tax
obligation against the FP Revolver until March 2011.
351
The Court agrees with the Former Executives that the delay
by AIG in effectuating the tax receivable offset was inequitable
and caused harm to the estate and creditors by the excess
interest paid by FP as a result of that delay.
352
iv.$127 Million Transfer to AIG
Immediately before the bankruptcy filing, AIG unilaterally
took $127 million of FP’s cash from the intercompany cash pool —
which AIG controlled — and applied it as a partial payment of the
FP Revolver.
353
AIG took that action without FP’s consent and
350
JX-15 at 2 (advising that offsetting AIG’s tax liability of $18.5
billion against the FP Revolver would reduce FP’s interest expense).
351
JX-86 (showing an $18.5 billion payment on the FP Revolver on
March 15, 2011). See also 04/23/2025 Tr. (Herzog) at 91:19–92:1 (“Q.
You have no idea why FP did not move more expediently to offset that
amount that FP was owed from what you allege is a loan in this case,
correct? A. I’m not alleging it was a loan. It was a loan. And I
don’t know why they move more quickly or more slowly. Q. You have no
understanding as to why this didn’t happen faster or slower, correct?
A. Not that I recall.”).
352
Cf. Ashinc, 629 B.R. at 220 (finding that lenders were injured by
payments debtor spent on transaction and professional fees for the
defendant which would otherwise have been paid to the lenders).
353
See JX-84 at 1 (12/14/2022 email from Carbone to Allison) (“This
email will confirm that [AIG] has offset the full amount of the
intercompany cash pool receivable owed by [AIG] to FP against the
amount of the intercompany payable owed by FP to [AIG].”); 04/24/2025
Tr. (Kosturos) at 71:14-17 (“Q. Okay, so you would agree with me that
on December 12th, you weren’t involved in any discussions around the
offset, correct? A. No. They unilaterally did it. They didn’t
107
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 107 of 151

despite FP’s repeated requests for those funds.
354
FP asserts that the Former Executives cannot use this as a
basis for an equitable subordination claim because AIG and FP
have agreed to a tolling of the statute of limitations on that
claim and any other claim that FP may have against AIG.
355
Notwithstanding the tolling agreement, the Court concludes
that AIG’s pre-bankruptcy action in refusing to turn over funds
belonging to FP at its request constitutes inequitable conduct.
That refusal violated the terms of the parties’ cash pool
agreement and caused harm to FP and its creditors.
356
The fact
that AIG has agreed since then to toll the statute of limitations
with respect to that claim
357
does not cleanse its inequitable
conduct in 2022.
ask.”).
354
See supra notes 77-81 and accompanying text.
355
DX-384 (tolling agreement between FP and AIG and its
subsidiaries); 04/24/2025 Tr. (Kosturos) at 35:19-20 (“Q. By signing
this [tolling agreement], what claims did you intend to toll? A. We
intended to toll all claims FP has against [AIG].”). See also DX-383
(tolling agreement between FP and its non-debtor subsidiaries).
356
See JX-52 at 4 (2011 Cash Pool Agreement) (“Any Participant may
cancel its participation or liquidate or withdraw all or part of its
share of the CP Pool at any time by giving notice of its intention in
writing or by telex to the MG Treasury Department.”). See supra note
78 and accompanying text.
357
See supra note 355 and accompanying text.
108
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 108 of 151

v.$253 Million Overpayment to Markets
The Former Executives also contend that AIG acted
inequitably by refusing to compensate FP for its prior payment of
costs incurred by AIG’s subsidiary, AIG Markets. In August 2022,
while preparing for its bankruptcy filing, FP sent evidence of
the overpayment claim to AIG and requested that AIG reimburse FP
for those expenses by offsetting them against the FP Revolver.
358

AIG did not.
359
In fact, AIG did no investigation of FP’s claim,
did not engage with FP to try to resolve the claim, and appears
358
See CCPX-754 at 1 (08/24/2022 email from Allison to Carbone,
AIG’s Chief Accounting Officer) (asserting that FP covered expenses
for [Markets] totaling $253 million for which it had not been
reimbursed); JX-59 at 8 (August 2022 FP presentation) (“[FP] covered
certain expenses incurred by AIG Markets for the period 2012 to 2019
which were never reimbursed. During this time period, AIG Markets and
AIGFP were under common management and were part of the same corporate
reporting segment[.] AIG Markets provides derivative and other
services to AIG and its subsidiaries. Since 2020, AIG Markets has
been billing AIG and its subsidiaries for its costs to provide these
services[.] It is estimated that the expenses covered by AIGFP that
are not related to derivatives or services provided by AIG Markets to
[FP] is approximately $253mm. Factoring the cost of [FP]’s funding,
its [sic] estimated that the amount of $285,791,130 would be due to
[FP] on 31 August 2022[.] It is recommended that AIG Markets settle
this amount with [FP]. Since this money is owed to AIG Markets by AIG
and its subsidiaries, the simplest way to achieve this is for AIG to
make this settlement by applying this amount to reduce the balance of
the loan that AIG has made to [FP][.]”).
359
04/22/2025 Tr. (Allison) at 106:7-18 (“Q. And then Ms. Carbone
denied the request in 2022 to give back the $250 million that FP paid
on behalf of Markets, right? A. Yes. May not have been directly
her, may have been others. But we did not get paid - FP did not get
paid. Q. FP was never given the $250 million? A. That’s right. FP
was not repaid the $250 million. Q. And in 2023, you said you were
still investigating this transaction, right? A. Uh-huh. Q. Is that
investigation is [sic] still ongoing? A. There’s been no progress on
the investigation.”).
109
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 109 of 151

to have simply ignored it.
360
The Court concludes that the evidence presented on this
point by the Former Executives is insufficient for the Court to
conclude that AIG acted inequitably. The Former Executives
presented no evidence that AIG had a legal obligation to pay for
AIG Market’s debts or even to engage with FP on its allegation of
overpayment. Therefore, the Court cannot conclude that AIG’s
actions with respect to that claim constituted inequitable
360
02/16/2024 Carbone Dep. at 182:21-183:3 (“If an entity was
performing services and not getting paid for it, jeez, they should
have raised it at that point in time, so which – you know again, going
back to, I’m not going to go back to AIG, Inc. and look back at 2012
on the allocations.”), 185:21-186:25 (“Q. And if I understand you
correctly, this was not looked into further? A. Correct. Q. And
because it wasn’t looked into further, you don’t know what was agreed
to by the entities at issue between 2012 and 2019, but you’re looking
at how it was booked at that time period, correct? A. No. Q. Okay.
A. I did not look at how it was booked at that time period. A. So
you didn’t look at how it was booked at that time period either. A.
Don’t say ‘either.’ Like, just again, we did not – this was a
reallocation based on the spreadsheet here. And we did not change the
allocation – we did not pursue this further. This was [Allison’s]
calculation, et cetera. This is again, where – where it started and
where it ended. Q. Okay. A. There was no further quote/unquote,
your words, ‘investigation.’ There was no further work done for all
the reasons I previously mentioned.”), 199:24-200:7 (“Q. So if this –
if [Allison] had raised this concern and it wasn’t about 2012 to 2019,
but it was about 2021, would you have inquired further? A. Likely
not. Q. Why not? A. Because, again, the allocation process agreed
upon by the subsidiaries.”), 201:21-202:2 (“Q. And did you need
anybody else’s approval to make [the reallocation] decision? A.
No.”), 190:14-17 (“Q. So you did not believe a correction was
warranted, so no correction was made? A. That’s right.”), 191:8-17
(“Q. To your knowledge, has there been any discussion with the
special committee or anyone at FP regarding how your decision might
impact the availability of this $250 million for the estate of the
bankruptcy? A. I’m not aware of any discussion with the special
committee. Q. Or anyone at FP? A. Or anyone at FP.”), 173:10-13
(“A. . . . So I disagree with the fact that now [Allison] is
recalculating what the allocation he thinks it should have been at
that point in time.”).
110
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 110 of 151

conduct supporting a decision to equitably subordinate AIG’s
claim.
vi.$154 Million Deferred Tax Asset
FP was part of AIG’s consolidated tax group, which meant
that AIG used FP’s losses to shelter income and FP had a right to
receive its share of any tax attributes resulting therefrom.
361

The Former Executives contend that as of 2022, AIG owed FP a $154
million tax receivable.
362
However, AIG apparently placed a
reserve against that asset, in anticipation of FP’s bankruptcy
filing and possible deconsolidation from the AIG group.
363
If FP
361
04/22/2025 Tr. (Allison) at 25:23-26:4 (“Q. And to be clear, was
there a tax-sharing agreement between AIG, Inc. and FP? A. There
was. Q. What did it provide about whether AIG, Inc. had to pay for
using FP’s tax assets? A. It generally provided that [AIG] would pay
for using the tax attributes of its subsidiaries.”); CCPX-823 at 8-9
(Accounting Policy Memorandum dated 12/6/2022) (“As noted above, FP
remains a member of AIG’s consolidated U.S. federal tax return group.
Therefore, AIG retains the ability to benefit and use the [deferred
tax assets] in the future to offset future taxable income of the
group.”).
362
CCPX-829 at 12 (12/07/2022 email from Dailey attaching
hypothetical liquidation analysis) (“[FP] has a tax receivable of
$154MM from its parent on account of its Tax Sharing Agreement, which
is fully reserved on its balance sheet in anticipation of a de-
consolidation.”); DX-522 ¶ 187 (Avery Report) (“Rather, the asset of
[FP] is an intercompany receivable from [AIG] resulting from the
provisions of its tax sharing agreement with AIG, Inc., not a deferred
tax asset itself. [AIG] retains the value of future tax deductions
generated by [FP] . . . .”).
363
CCPX-829 at 12 ([FP] Hypothetical Liquidation Analysis 12072022)
(“[FP] has a tax receivable of $154MM from its parent on account of
its Tax Sharing Agreement, which is fully reserved on its balance
sheet in anticipation of a deconsolidation. In the event of an [FP]
emergence with [AIG] as the equity holder (and re-consolidation of
[FP] in [AIG]’s books) it is anticipated that this reserve will be
pulled out[.]”).
111
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 111 of 151

emerged from bankruptcy under AIG’s control, however, it was
expected that the reserve would be released.
364
The Court concludes that the action of AIG in placing a
reserve against the tax asset was not inequitable conduct. The
asset remains on FP’s books and may be pursued by FP (or another
party with standing) subject to any defenses AIG may have.
365
2.Injury or Unfair Advantage
The Former Executives need only show an injury or unfair
advantage, not both.
366
The Court concludes that the Former
Executives have met that burden. For the reasons stated above,
364
CCPX-823 at 3 (“AIG is expected to re-gain control and ‘re-
consolidate’ FP once the bankruptcy process has been completed. It is
expected that the majority of the loss recognized at de-consolidation
will be reversed as a gain in the income statement upon re-
consolidation of FP and subs.”).
365
04/28/2025 Tr. (Avery) at 202:5-25 (“Q. But the receivable
itself is still in FP’s books, right? A. It’s been completely
reserved against. There’s a valuation allowance against it for the
total value. Q. The receivable is still on the books, but there’s an
allowance against it, right? A. That is true. Q. Okay. And
booking an allowance doesn’t stop FP from collecting on the
receivable; does it? A. It’s something that’s been excluded from the
bankruptcy for consideration of what the total assets are, that for
some reason there’s been a determination that requires an evaluation
allowance about something that is pertaining to a services agreement
where the tax shared services agreement should benefit [FP] but,
rather, it’s being valued against. Q. Let me try that again. FP
booking an allowance doesn’t stop FP from collecting on the
receivable; does it? A. It doesn’t, but it reduces the overall
position of that asset on its books at that point in time. That asset
is valued at zero right now.”).
366
Mid-Am. Waste, 284 B.R. at 71 (holding that an insider creditor
need not have engaged in the inequitable conduct for personal benefit
if its conduct injured creditors) (citing Citicorp Venture Cap., 160
F.3d at 986 (stating that claimant’s misconduct must have resulted in
injury to other creditors or conferred an unfair advantage on the
claimant) (emphasis added)).
112
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 112 of 151

the Court finds that AIG injured the Former Executives by (1)
preventing FP from implementing a plan to restore the Former
Executives’ account balances in the Compensation Plans, (2)
misleading the Former Executives into remaining with FP during
the winddown by suggesting that a restoration plan could be
implemented, (3) aborting its plan to recapitalize FP in 2010 in
order to prevent the Former Executives from recovering under the
Compensation Plans, (4) delaying the setoff of a tax receivable
owed to FP which caused FP to incur additional interest expense
on the FP Revolver, and (5) retaining $127 million in funds
belonging to FP. By each of those actions, AIG favored itself
and caused harm to FP and the Former Executives. Therefore, the
Court concludes that the Former Executives have carried their
burden of proving an injury or unfair advantage.
3.Whether Equitable Subordination Is Inconsistent
with the Bankruptcy Code
The Court cannot subordinate debt in violation of the
Bankruptcy Code’s rules of priority.
367
However, section 510(c)
of the Bankruptcy Code expressly provides that the “court may . .
. under principles of equitable subordination, subordinate for
purposes of distribution all or part of an allowed claim to all
or part of another allowed claim or all or part of an allowed
367
Winstar, 554 F.3d at 414 (holding that a creditor’s claims can
only be subordinated to other creditors and not below equity
interests); Nu Ride, 2024 WL 4376130 at *25 (holding that plaintiffs’
equitable subordination claims would not be dismissed because they did
not seek to subordinate the creditors’ claims below equity).
113
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 113 of 151

interest to all or part of another allowed interest.”
368
The Former Executives’ deferred compensation claims and
AIG’s claim under the FP Revolver are both unsecured debts.
Under the terms of the Compensation Plans, however, the Former
Executives’ claims are subordinated to all other creditors’
claims, including AIG’s claim under the FP Revolver.
369
Nonetheless, no provision of the Bankruptcy Code prohibits
subordinating the FP Revolver to the Former Executives’ claims
under equitable principles and section 510(c) of the Bankruptcy
Code expressly preserves the right to do so.
370
Therefore, the
Court concludes that equitably subordinating AIG’s unsecured
claim to the Former Executives’ unsecured claims does not offend
the Bankruptcy Code’s repayment priority.
4.Conclusion
For the reasons stated above, the Court finds that AIG acted
inequitably, caused injury to FP and the Former Executives, and
subordination of AIG’s claim is not inconsistent with the
Bankruptcy Code. Consequently, the Court will equitably
subordinate AIG’s claim to the Former Executives’ claims under
the Compensation Plans, in such amounts as may be determined are
due after phase two of this proceeding.
368
11 U.S.C. § 510(c).
369
JX-2 § 4.01(a); CCPX-2 at 4.01(a).
370
11 U.S.C. § 510(c)(1).
114
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 114 of 151

C.Successor Liability
The Former Executives argue that AIG is liable as a
successor to FP under the terms of the Compensation Plans and
under the continuity of enterprise doctrine.
371
FP asserts that
the Former Executives have not carried their burden of proving
either.
372
1.Contractual Successor Liability
The DCP and SIP both provide that “if AIG Financial Products
Corp. consolidates or amalgamates with, or merges with or into,
or transfers all or substantially all of its assets to, another
entity, then the resulting, surviving or transferee entity shall
assume all of the obligations of AIG Financial Products Corp.
hereunder.”
373
Both agreements provide that Connecticut law
applies.
374
371
Maltese v. Hvolbeck, No. FSTCV226056880S, 2023 WL 4446652, at *2
(Conn. Super. Ct. July 7, 2023) (holding that the purpose of successor
liability is “to provide contract and tort creditors with an avenue
for recovery in appropriate cases against successor entities, when the
predecessor that contracted with them or committed the tort . . . had
sold substantially all of its assets and [is] no longer a viable
source of recovery.”) (citations omitted).
372
See Chamlink Corp. v. Merritt Extruder Corp., 899 A.2d 90, 93
(Conn. App. Ct. 2006) (affirming judgment against the plaintiff on its
successor liability claim because the evidence presented was not
sufficient to support a finding that the successor corporation was a
mere continuation of the prior corporation).
373
JX-2 § 4.01(b); CCPX-2 § 4.01(b).
374
JX-2 § 4.05; CCPX-2 § 4.05.
115
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 115 of 151

To determine whether FP transferred all or substantially all
of its assets to another entity, the Court must first determine
what “all” of FP’s assets were. To do so, the Court must take a
snapshot of FP’s assets on the date FP adopted a plan of
liquidation.
375
a. Date by Which to Measure FP’s Assets
The parties preliminarily dispute the date that the Court
should use to measure FP’s total assets in order to determine if
FP transferred substantially all of them to AIG. FP argues that
the Court should take the snapshot in 2008 when FP began to wind
down its operations and sell its assets, which ultimately
resulted in its bankruptcy filing. The Former Executives argue
that the Court should take the snapshot in 2022, because that
year’s transactions were qualitatively different from the
transactions that began in 2008 at the time of the financial
crisis.
While it may be appropriate to consider multiple transfers
as one integrated transaction when assets are transferred in
stages (or piecemeal),
376
the Court finds that all of the
375
See, e.g., Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691
F.2d 1039, 1051 (2d Cir. 1982) (holding, for purposes of a boilerplate
successor liability clause in a debenture, that the date for
evaluating all of the transferor’s assets was the date its
shareholders adopted a plan of liquidation).
376
See, e.g., Int’l Specialty Prods., Inc. v. Dexter Corp., No.
3:00-CV-157 JBA, 2000 WL 35453111, at *6 (D. Conn. July 27, 2000)
(acknowledging that a corporation is not free to sell all its assets
in separate transactions or steps in order to avoid shareholder
116
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 116 of 151

transactions from 2008 through 2022 should not be treated as one
transaction for several reasons.
First, FP completed numerous transactions between 2008 and
2021. No evidence was presented about those transactions,
including to whom the derivative contracts were sold or what
consideration was given to FP for the transfers. Nor was any
evidence presented that those transactions were part of “one
unified agreement” or had any causal connection to each other or
to those that occurred in 2022.
377
As noted above, in 2008 FP was
not even considering a bankruptcy filing because that was not a
viable option.
378
Instead, for more than a decade, FP sought to
wind down its business simply to extricate itself from its
derivative contracts and reduce its risk of loss.
379
approval but declining to require shareholder approval for the sale
sub judice because there was no evidence that it was part of a plan to
dispose of all of the company’s assets). See also Sharon Steel Corp.,
691 F.2d at 1051 (successor obligor provisions may be implicated when
a company engages in a piecemeal sale of all of its assets); Coughlan
v. NXP B.V., No. CIV. A. 5110-VCG, 2011 WL 5299491, at *7 (Del. Ch.
Nov. 4, 2011) (in order to determine the substance of what truly
occurred courts should treat “the ‘steps’ in a series of formally
separate but related transactions involving the transfer of property
as a single transaction if all the steps are substantially linked.
Rather than viewing each step as an isolated incident, the steps are
viewed together as components of an overall plan.”) (citations
omitted).
377
Int’l Specialty Prods., 2000 WL 35453111, at *6.
378
See supra notes 35-36 and accompanying text.
379
04/21/2025 Tr. (Habayeb) at 87:22-88:2 (“Q. Are you aware of
when FP began its wind-down process? A. From my recollection,
somewhere around October of 2008. Q. And were you involved in any
way in the wind-down process? A. I was, as I participated in the
steering committee that oversaw the wind-down.), 156:21-25 (“Q. And
117
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 117 of 151

The Court finds that FP changed its plans beginning in 2022.
FP installed a Special Committee in January 2022 to consider
“strategic alternatives,” including a bankruptcy filing.
380
In
contrast to prior transactions, FP novated the derivative
contracts to its affiliates, rather than to third parties.
381

Furthermore, the purpose of the 2022 transactions was not to
derisk the company as it was in 2008; instead, it was to continue
the winddown of the derivatives without the negative consequences
the wind-down involved derisking FP; right? A. That’s correct. Q.
Either by exiting existing trading positions or by letting them run
their course? A. That’s correct.”).
380
JX-40 at 1-2 (Unanimous Written Consent giving Special Committee
power to “recommend to [FP’s] Board that [FP] enter into a Potential
Strategic Transaction” that was defined as “certain potential
liability management transactions and other strategic alternatives.”);
CCPX-709 at 3 (describing bankruptcy as a potential option for winding
down FP’s business).
381
04/23/2025 Tr. (Stubbs) at 153:18–23 (“Q. Now, but the novations
in 2008 and thereafter were done to third parties, not to AIG
affiliates; correct? A. So there was a mixture. I think 2008, most
of the novations are, if not all of them - again, I have limited
memory of that - were with third parties. But there were instances
where they were with internal affiliates.”), 158:6-8 (“Q. And
novating to affiliates in 2022 was a strategy for the bankruptcy of
FP; correct, sir? A. It was an option.”), 123:9-14 (“Q. And why
were most of the derivatives novated to Matched [Funding]? A. That
was a logical place to put the remaining FP derivatives. Matched
Funding had liabilities that go out to 2040 - plus as a portfolio
that’s a, you know, established portfolio in the company.”);
04/28/2025 Tr. (Avery) at 66:12-23 (“I did review Mr. Stubbs’
testimony. And Mr. Stubbs indicated . . . . instead of novating with
third parties, which had been the conduct in the past, that - that
there was a change in strategy to begin to novate to affiliates.”);
02/06/2025 Friedland Dep. at 253:23–254:3 (“Q. You’re not aware of
novations that went to other AIG entities prior to 2022? A. That’s
right.”).
118
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 118 of 151

of a bankruptcy filing by FP.
382
That same year, and apparently
for the first time, FP set off large balances owed by it to its
subsidiaries against its equity in those subsidiaries to simplify
its balance sheet.
383
Therefore, the Court cannot conclude that the series of
transactions from 2008 through 2022 were part of one integrated
transaction. In 2022, however, the Court finds that all the
382
04/24/2025 Tr. (Kosturos) at 20:23-21:4 (“Well, when we reviewed
the transactions it became obvious that if the company - if FP did
file Chapter 11, that under the safe harbor rules, the counterparties
would be able to declare an event of default and then exercise their
termination rights, which would result in a sizable loss to FP. So
that was our primary reason to novate those to a subsidiary.”); 11
U.S.C. §§ 362(b)(7), 546(e), & 560. See supra note 35 and
accompanying text. See also JX-53 at 4 (06/15/2022 A&M Presentation
to the Special Committee) (“These novations are being conducted to
prevent a potentially large value loss (previous estimates show
potential losses of up to $510 million) resulting from counterparty
terminations upon an event-of-default (bankruptcy)”); 02/06/2025
Friedland Dep. at 181:8-21 (“Well, with the examples of the
derivatives, we had previously discussed how without novation, if FP
went into bankruptcy, it would give rise to a default event under the
ISDA, subject to the International Swap Dealer Association agreements
between the counterparties and FP, which would give the counterparties
unilateral rights to reprice and collect on their – and it would be a
substantial loss to FP. But additionally, any harm to FP would also
harm AIG both as parent and also as guarantor.”).
383
See, e.g., JX-50 at 2 (03/14/2021 Transaction summary memo)
(“[Matched Funding] proposes to settle its intercompany liability to
[Pinestead] by transferring to [Pinestead] $21bn of its intercompany
receivable from FP. This will reduce both the assets and liabilities
of [Matched Funding], but there will be no change to the net equity of
[Matched Funding]. Note that [Pinestead] and [Matched Funding] are
both 100% owned subsidiaries of FP. FP, [Matched Funding], and
[Pinestead] are all US entities. There will be no income generated or
other change in net equity in any entity from this proposed
transaction.”). See also 04/22/2025 Tr. (Allison) at 85:2-23 (“Q.
[Y]ou were trying to do the cleanup transactions for years, is that
right? A. A number of years, yes. . . . Q. But then when the
bankruptcy planning started, then people focused on them? A. People
focused on these at that time.”).
119
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 119 of 151

transactions appear to have one purpose and were largely
transfers to one entity, Matched Funding. Consequently, the
Court concludes that the transactions in 2022 were an integrated
transaction and, therefore, it should take the snapshot of FP’s
assets as of January 1, 2022.
b.Effect of the Transfers
To determine if the 2022 transfers triggered the successor
liability provisions in the Compensation Plans, the Court must
determine if FP transferred all or substantially all of the $35.3
billion in assets it held on January 1, 2022,
384
to AIG.
385
Courts typically employ a two-part test to determine whether a
business has transferred substantially all of its assets to one
entity: (1) the value of the assets transferred compared with the
transferor’s total assets (the quantitative analysis) and (2) the
transfer’s impact on the transferor’s business and its very
“existence and purpose” (the qualitative analysis).
386
384
JX-45 (FP’s 2021 unaudited balance sheet).
385
See, e.g., Int’l Specialty Prods., 2000 WL 35453111, at *1
(concluding that “although Dexter developed the ultimate objective of
selling off ‘all or substantially all’ its assets through a series of
transactions, in the absence of any showing that the transactions were
interrelated or interdependent such that one prearranged plan could be
inferred, Dexter is not required to submit the first transaction in
the series to a shareholder vote” under state statute requiring
shareholder approval for a sale of all or substantially all of the
assets of a company).
386
See id. at *3 (concluding that a quantitative analysis alone is
not mandated and that qualitative factors are also typically used).
See also Hollinger Inc. v. Hollinger Int’l, Inc., 858 A.2d 342, 378
(Del. Ch. 2004) (holding that a shareholder vote is required only when
120
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 120 of 151

i.Quantitative Analysis
As the Court found above,
387
FP undertook the following
transactions in 2022: (1) FP offset amounts it owed to its
subsidiaries against its equity in those subsidiaries totaling
approximately $33.9 billion,
388
(2) FP transferred its remaining
derivative contracts and related bonds and cash, to Matched
Funding,
389
which were valued at approximately $1.1 billion.
390
In
addition, on the day before FP filed its bankruptcy petition, AIG
swept $127 million of FP’s cash from the shared cash pool.
391
At
the time of its bankruptcy filing, FP only had $10 million in
cash and $152 million in total assets.
392
As the Court concluded above, the offsets did not constitute
a transfer of property of FP to anyone.
393
Therefore, they do not
form part of the quantitative analysis. Removing the offsetting
the assets to be sold, when considered quantitatively and
qualitatively, amount to “substantially all” of the corporation’s
assets); Gimbel v. Signal Cos., Inc., 316 A.2d 599, 606 (Del. Ch. Jan.
10, 1974), aff’d 316 A.2d 619 (Del. 1974) (holding that transferred
assets must be “quantitatively vital to the operation of the
corporation” as well as “substantially affect[] the existence and
purpose of the corporation.”).
387
See supra notes 70-76 and accompanying text.
388
See supra notes 71-72, 329-36 and accompanying text.
389
See supra notes 73-74, 337-47 and accompanying text.
390
See supra note 76 and accompanying text.
391
See supra notes 77-80, 353-57 and accompanying text.
392
See supra notes 82, 84 and accompanying text.
393
See supra notes 332-36 and accompanying text.
121
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 121 of 151

transactions ($33.9 billion) from FP’s balance sheet as of
January 1, 2022 ($35.3 billion), left FP with approximately $1.4
billion in assets.
394
The transfers to Matched Funding of $1.1
billion therefore constituted approximately 79% of FP’s assets.
The $127 million cash sweep by AIG constituted approximately 9%.
Thus, the Court concludes that the transfers to Matched Funding
meet the quantitative test but that the transfers to AIG do
not.
395
ii.Qualitative Analysis
Under the qualitative test, the Court must determine whether
the transfers substantially affected FP’s ability to continue to
operate its business.
396
394
See supra note 71 and accompanying text. See also JX-45.
395
See Sharon Steel, 691 F.2d at 1051–52 (holding that a transfer of
only 51% of the total book value of the transferor’s assets was not a
transfer of substantially all of its assets); Jaskiewicz v. ITG
Commc’ns, LLC, No. 3:21-00912, 2023 WL 417694, at *14 (M.D. Tenn. Jan.
25, 2023) (compiling cases and stating that “the substantial body of
caselaw from numerous jurisdictions and myriad contexts construing the
phrase ‘all or substantially all’ of an entity’s assets or equity to
mean, at a minimum, substantially more than two-thirds or even three-
quarters of such assets or equity.”); In re BankAtlantic Bancorp, Inc.
Litig., 39 A.3d 824, 843 (Del. Ch. 2012) (finding that a sale of 85-
90% of the company’s assets was a sale of “substantially all” of the
company’s assets). But see Katz v. Bregman, 431 A.2d 1274, 1276 (Del.
Ch. 1981) (finding that a sale of 51% of the company’s assets
constituted “substantially all” of the company’s assets).
396
See, e.g., Int’l Specialty Prods., 2000 WL 35453111, at *3
(stating in dicta that courts have considered the quantitative test
because “even when [the] dollar amount of assets retained by [a]
corporation is substantial, [a] sale can still be ‘substantially all’
if ‘the sale changes the nature of the corporate activity’ because
‘shareholder notification and participation in the corporate decision
to abandon the corporate enterprise may be as, or more, important to
certain shareholders than the dollar value of assets conveyed or
122
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 122 of 151

FP contends that the asset transfers from FP to Matched
Funding do not meet the qualitative test. It argues that
transfers from parents to solvent wholly-owned subsidiaries are
generally outside the scope of successor obligor clauses because
no value left the parent-transferor.
397
The Court finds that the
cases on which FP relies for that proposition are
distinguishable. Those cases held that there was no transfer of
all or substantially all of a parent holding company’s assets
where assets were transferred between subsidiaries owned by the
parent holding company.
398
In this case, FP was not a holding
company transferring assets between its subsidiaries; instead, FP
had operations and assets which it transferred to a subsidiary.
While FP indirectly owned those assets after the transfer to
Matched Funding, the rights the Former Executives (the only
retained.’”) (citations omitted). See also Gimbel, 316 A.2d at 606
(stating that a transaction that “substantially affects the existence
and purpose of the corporation” requires shareholder approval).
397
See Whitebox Relative Value Partners, LP v. Transocean, Ltd., 20
Civ. 7143 (GBD), 2020 WL 7406063, at *5 (S.D.N.Y. Dec. 16, 2020),
vacated as moot, 2022 WL 288183 (2d Cir. Feb. 1, 2022); Roseton OL,
LLC v. Dynegy Holdings Inc., C.A. No. 6689-VCP, 2011 WL 3275965, at
*13 (Del. Ch. July 29, 2011).
398
Whitebox, 2020 WL 7406063 at *3 (holding that addition of layer
of intermediate companies between holding companies and operating
companies did not constitute transfer of “substantially all” of the
assets of the holding companies because the holding companies
continued to indirectly own the operating assets); Roseton, 2011 WL
3275965, at *13 (holding that transaction proposing to transfer assets
from some of its subsidiaries to new subsidiaries owned by it did not
affect the holding company’s “corporate purpose and existence”). In
addition, the Whitebox decision was vacated on appeal as moot when the
transaction was modified so that the intervening subsidiaries were
eliminated resulting in no transfer. Whitebox, 2022 WL 288183 at *2.
123
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 123 of 151

creditors of FP who were not guaranteed to be paid by AIG) were
qualitatively different: they were subordinate to the rights of
creditors of the subsidiary.
399
At the time of the transfers, FP’s only operations were
winding down its remaining derivative contracts.
400
After those
contracts (and their related assets) were novated, Matched
Funding was responsible for winding them down.
401
Those transfers
399
See Roseton, 2011 WL 3275965, at *15 n. 110 (acknowledging that
“parent and subsidiary corporations are separate entities, having
separate assets and liabilities . . . the parent’s ownership of all of
the shares of the subsidiary does not make the subsidiary’s assets the
parent’s. . . . Hence, the parent’s creditors have no claim to the
subsidiary’s assets, and vice versa.”) (quoting Regency Holdings
(Cayman), Inc. v. Microcap Fund Inc. (In re Regency Holdings (Cayman),
Inc.), 216 B.R. 371, 375 (Bankr. S.D.N.Y. 1998)). See also Campbell
v. Vose, 515 F.2d 256, 259-60 (10th Cir. 1975) (holding that transfer
from parent to subsidiary was a transfer of substantially all of the
assets of the parent, requiring shareholder approval under Oklahoma
law).
400
DX-345 ¶ 6 (Declaration of William Kosturos dated December 14,
2022) (“Following the Financial Crisis, AIG FP predominantly operated
to manage and wind down the remaining transactions in its
portfolio.”); CCPX-189 at 2 (letter to from Bill Dooley dated December
23, 2008) (“As I look back on 2008 we have restructured Financial
Products from an ongoing operation to an organization that supports
the wind down of our business . . . .”).
401
04/23/2025 Tr. (Stubbs) at 202:25-203:24 (“Q. And so once FP was
placed in bankruptcy, Matched Funding took over what FP had been doing
with respect to cash management? A. Well, Matched Funding . . . was
doing [a] similar role to what FP had been doing. . . . Q. And the
wind-down business that had been at FP, Matched [Funding] is now
running that wind-down business; correct? A. Correct. Q. Right.
It’s actively managing the obligations on those derivatives contracts;
correct? A. Correct.”); 04/23/2025 Tr. (Avery) at 87:5–88:17 (“Q.
So, to sum up, what was your opinion on what happened to the business
functions FP had been performing before the 2022 transactions? A. So
now the functions have moved from FP to Matched. Matched [Funding]
is now winding the derivative portfolio. It is now managing the
portfolio of derivatives and then the associated bond collateral needs
with regard to fluctuation in value and collateral calls. And it’s
also performing the cash management function at Matched Funding to
124
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 124 of 151

foreclosed FP’s ability to continue operations, and
“substantially affect[ed] the existence and purpose of the
corporation.”
402
Therefore, the Court concludes that the novation
of FP’s derivative contracts (and their related cash and bonds)
to Matched Funding meets the qualitative test of a transfer of
substantially all of FP’s assets and business operations.
In contrast to the transfer to Matched Funding, the Court
concludes that the transfer of $127 million in cash to AIG did
not constitute a transfer of substantially all of FP’s business
operations to AIG because it was just a transfer of cash.
Consequently, the Court concludes that the transfer to AIG does
not meet the qualitative test.
Because the Former Executives have met both prongs of the
successor liability test with respect to the transfer of the
derivatives, bonds, and cash to Matched Funding, the Court
concludes that the transfer was of substantially all of FP’s
assets and business. Therefore, the Court concludes that Matched
Funding is a successor to FP under the terms of the Compensation
Plans.
403
manage the liquidity needs of the subsidiaries, and doing so through
the use of the cash management – the cash pool agreement that was put
in place and the revolver that was put in place with [AIG].”).
402
Gimbel, 316 A.2d at 606.
403
See JX-2 § 4.01(b); CCPX-2 § 4.01(b). The Court makes no
findings as to the amount of any liability Matched Funding may have
under the Compensation Plans. That determination will await the
second phase of the trial. See also Robbins v. Physicians for Women’s
125
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 125 of 151

However, the Court concludes that the Former Executives have
not established that FP’s transfers to AIG in 2022 constituted a
transfer of substantially all of the assets or business
operations of FP under either the quantitative or the qualitative
tests for successor liability. Therefore, the Court concludes
that AIG is not a successor under the terms of the Compensation
Plans.
The Former Executives argue, nonetheless, that the Court
must conclude that AIG is a successor under the Compensation
Plans because it indirectly received, and benfited from, the
transfer of FP’s business and assets to Matched Funding. They
assert that the evidence shows that AIG enabled Matched Funding
to continue FP’s business by (i) allowing FP to transfer $35
million from the cash pool to Matched Funding,
404
(ii) entering
into a cash pooling agreement with Matched Funding directly on
Health, LLC, 90 A.3d 925, 930-31 (Conn. 2014) (holding that rights of
preceding corporation vested in succeeding corporation) (citing
Herbolsheimer v. SMS Holding Co., 608 N.W.2d 487, 496 (Mich. Ct. App.
2000) (“Simply being a successor in liability does not make a company
liable — there must be an allegedly viable legal claim against the
predecessor. . . .”).
404
04/23/2025 Tr. (Stubbs) at 183:3–14 (“Q. FP had 35 million and
then Matched [Funding] had that 35 million? A. Yes. Q. And this
move was part of the bankruptcy planning process; right, sir? A.
Correct. Q. Right. First, you moved the derivatives to Matched
Funding; right? A. Yes. Q. And then Matched [Funding] needed to be
able to manage those derivatives and needed the cash to do that. A.
Correct. Cash and unencumbered securities.”).
126
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 126 of 151

October 5, 2022,
405
(iii) providing a revolving credit line to
Matched Funding,
406
(iv) continuing to guarantee the obligations
to the counterparties to the derivative contracts,
407
and (v)
assigning the same employees of AIG who had managed FP to Matched
Funding to manage FP’s former business.
408
The Former Executives
405
Id. at 186:21–25 (“Q. So is it fair to say you wanted to be –
you wanted to make sure Matched [Funding] had the same cash pool
agreement as AIG FP had? A. I wanted to make sure that Matched
Funding had the same liquidity sources available to it that FP had.”).
See also JX-72 (10/18/22 email from Stubbs to Hirsch) (“If we have the
same cash pool arrangement at Matched Funding as we have at FP then it
is ‘business as usual’ in terms of operational liquidity needs.”); JX-
075 (10/29/22 email from Stubbs to Cosgrove attaching Cash Pool
Agreement between AIG and Matched Funding).
406
04/23/2025 Tr. (Stubbs) at 187:12–14 (“Q. And you were also
adamant that Matched [Funding] have a revolver before FP entered
bankruptcy; right, sir? A. Correct.”); CCPX-838 at 1 (12/13/2022
Revolving Loan Agreement between AIG and Matched Funding).
407
04/22/2025 Tr. (Allison) at 103:21–24 (“Q. And if Matched
[Funding] had an event of default, then AIG would have to pay any
obligations that Matched [Funding] can’t pay, right? A. Yes.
There’s a general guarantee of AIG Matched Funding as well.”);
04/23/2025 Tr. (Stubbs) at 172:1–4 (“Q. Right. And you understood
counterparties wanted a representation that the AIG guarantee would
remain in place when you novated the contracts to Matched [Funding];
right, sir? A. Yes.”). See also JX-81 at 3 (AIG Guarantee
Valuation) (stating that “AIG has guaranteed the obligation of all the
FP subsidiaries that have exposures with 3rd parties” including
Matched Funding).
408
04/23/2025 Tr. (Stubbs) at 113:4-114:2 (“Q. And so just to be
clear, when did you kind of rejoin the FP family? A. So 2018, around
that time; but it wasn’t until, I think, end of June 2022 that I
became the CEO, president and joined the board. . . . Q. And do you
have a role at Matched [Funding]? A. President and CEO of Matched
[Funding]. Q. And just to be clear, are you employed by FP? A. I
work for FP in my role, but it’s under a service-level agreement
between AIG Markets and the FP entities. Q. And AIG Markets -
there’s been testimony about that. That’s a subsidiary of [AIG] Inc.,
not FP; right? A. Yeah. AIG Markets is 100-percent-owned subsidiary
of AIG.”); 04/22/2025 Tr. (Allison) at 5:9–12 (“Q. Mr. Allison, what
is your current role at [FP]? A. Currently, I’m the chief accounting
officer and the chief financial officer of [FP].”), 9:2–19 (“Q. And
127
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 127 of 151

contend that once FP exits bankruptcy, FP’s business functions
will return to FP.
409
Consequently, the Former Executives argue
that because AIG orchestrated and supported the 2022
transactions, retained indirect control of the assets in Matched
Funding, and indirectly benefited from the transfers, AIG must be
considered the successor to FP.
Although AIG controlled FP, the Court concludes that AIG is
not FP’s contractual successor. Under the express language of
the Compensation Plans, only an entity to whom FP transfers all
or substantially all of its assets is a successor of FP and
liable for the obligations owed to the Former Executives.
410
The
provision at issue does not say one who “orchestrates” a transfer
just to be clear, what role do you have at Matched [Funding]? A. I’m
the chief accounting officer, chief financial officer and I’m the
board of directors.”). Stubbs and Allison also have similar roles at
AIG’s subsidiary, Markets. Id. at 9:17–19 (“Q. And just to be clear,
what are the role or roles you have at Markets? A. Chief accounting
officer, chief financial officer.”), 54:5-9 (“Q. And you mentioned Mr.
Stubbs on your direct. He’s the CEO of AIG Markets and AIG Matched
[Funding]? A. And [FP]. Q. So he’s the CEO of AIG Markets, Matched
[Funding] and FP? A. Yes.”); 02/06/2025 Friedland Dep. at 235:15–22
(“Q. Post-bankruptcy, do you have any knowledge of who is running the
operations of the subsidiaries? A. The day-to-day activities of
winding down the book, the portfolio, yes. Q. What’s your
understanding? A. It’s the same people that were doing it before. So
it’s Mr. Stubbs.”). See also JX-81 at 3 (“While FP may be placed into
bankruptcy, its subsidiaries will continue to operate as if nothing
has changed. The activities of these entities will continue to be
managed by AIG. . . .”).
409
JX-77 at 10 (“AIG will then re-consolidate [FP] and subsidiaries
once the bankruptcy process is complete.”); CCPX-823 (“AIG is expected
to re-gain control and ‘re-consolidate’ FP once the bankruptcy process
has been completed.”).
410
JX-2 § 4.01(b); CCPX-2 § 4.01(b).
128
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 128 of 151

or who “supports” a transfer or even one who indirectly
“benefits” from a transfer has successor liability. The Court
cannot interpret the language of the contract to give the Former
Executives rights that the contract did not give them.
411
In this
case, the Court has found that AIG was not the transferee of
substantially all of FP’s assets. Therefore, AIG is not liable
as a successor to FP under the express language of the
Compensation Plans.
Finally, the Former Executives contend that AIG has ratified
the Compensation Plans by accepting payments over the years of
its share of the profits and by orchestrating the transfer of
substantially all of FP’s assets to Matched Funding. The Court
rejects this argument. Being a party to the Compensation Plans
and accepting its benefits does not mean that AIG has assumed
obligations that it did not have under those agreements.
Under the express terms of the Compensation Plans, only a
party to whom all or substantially all of FP’s assets have been
transferred is obligated to make the payments that FP may owe to
the Former Executives.
412
As the Court found above, AIG was not
the transferee of substantially all of FP’s assets. Therefore,
411
See Levine v. Massey, 654 A.2d 737, 740–41 (Conn. 1995) (“A court
cannot import into an agreement a different provision nor can the
construction of the agreement be changed to vary the express
limitations of its terms.”) (citations omitted); Heyman v. CBS, Inc.,
423 A.2d 887, 894 (Conn. 1979) (“It is hornbook law that courts do not
rewrite contracts for the parties.”).
412
JX-2 § 4.01(b); CCPX-2 § 4.01(b).
129
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 129 of 151

the Court concludes that under the provisions of the Compensation
Plans, AIG is not a successor to FP and is not liable for any of
FP’s obligations to the Former Executives under those Plans.
2.Continuity of Enterprise Doctrine
The Former Executives also assert that AIG is liable for
their deferred compensation claims under the continuity of
enterprise doctrine.
FP asserts preliminarily that the Former Executives do not
have standing to bring a successor liability claim under the
continuity of enterprise theory, arguing that the claim belongs
exclusively to the bankruptcy estate.
413
However, the Third
Circuit has acknowledged that individual creditors may have
standing to prosecute a successor liability claim if they can
show that they hold “individualized claims” caused by direct
action of the defendant.
414
The Court finds it unnecessary to
decide this issue, however, because it finds that the Former
Executives have not met their burden of proof on this theory.
Under Connecticut law, “the general rule is that where a
corporation sells or otherwise transfers all of its assets, its
transferee is not liable for the debts and liabilities of the
413
See In re Emoral, Inc., 740 F.3d 875, 881 (3d Cir. 2014) (holding
that successor liability claims under mere continuation theory are
property of the estate because recovery would serve to increase the
pool of assets available to all creditors).
414
Id. at 879-80 (distinguishing generalized harm incurred by all
creditors from claims assertable by individual creditors for harm
specific to them).
130
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 130 of 151

transferor.”
415
There are exceptions to the general rule,
however, including, as the Former Executives argue, if there was
a “mere continuation” of the transferor or there is a “de facto
merger” of two companies.
416
Connecticut law examines four
factors to determine whether there has been a de facto merger or
mere continuation: “(1) continuation of the enterprise of the
seller corporation so that there is a continuity of management,
personnel, physical location, assets and general business
operations; (2) continuity of shareholders; (3) the seller
corporation ceases its ordinary business operations, liquidates,
and dissolves as soon as legally and practically possible; (4)
the purchasing corporation assumes those liabilities and
obligations of the seller ordinarily necessary for the
uninterrupted continuation of normal business operations of the
seller corporation.”
417
The plaintiff need not establish every
one of these factors, and the Court should apply a balancing test
415
Robbins, 90 A.3d at 929 (stating that “[T]he general rule is that
where a corporation sells or otherwise transfers all of its assets,
its transferee is not liable for the debts and liabilities of the
transferor, and that [the] liability of a new corporation for the
debts of another corporation does not result from the mere fact that
the former is organized to succeed the latter.”) (citations omitted).
416
Kuhns Bros., Inc. v. Fushi Int’l, Inc., No. 3:06cv1917, 2008 WL
2167091, at *4 (D. Conn. May 21, 2008).
417
Peglar & Assocs., Inc. v. Pro. Indem. Underwriters Corp., No.
X05CV970160824S, 2002 WL 1610037, at *7 (Conn. Super. Ct. June 19,
2002) (finding plaintiff failed to prove any of the four factors
necessary to support successor liability) (citation omitted).
131
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 131 of 151

that focuses on intent.
418
a.Continuity of Business
In this case, FP’s winddown of the derivative contracts
continues, but it is Matched Funding, not AIG, that is conducting
that business now. The Former Executives contend that AIG is
controlling and operating Matched Funding’s business. However,
the evidence establishes that Matched Funding’s employees are
conducting the day-to-day operations that FP used to conduct.
419

Even though some of those employees may have dual roles at AIG,
420
the Court finds that the evidence presented was insufficient to
support a conclusion that AIG, rather than Matched Funding, is
continuing FP’s business.
421
418
Id. See also Collins v. Olin Corp., 434 F. Supp. 2d 97, 103 (D.
Conn. 2006) (noting that the court should analyze the factors “in a
flexible, realistic manner, focusing on intent”) (citation omitted).
419
See 02/06/2025 Friedland Dep. at 235:15–22 (“Q. Post-bankruptcy,
do you have any knowledge of who is running the operations of the
subsidiaries? A. The day-to-day activities of winding down the book,
the portfolio, yes. Q. What’s your understanding? A. It’s the
same people that were doing it before. So it’s Mr. Stubbs.”).
420
See, e.g., 04/23/2025 Tr. (Stubbs) at 113:12-20 (“Q. [D]o you
have any functional roles in the AIG corporate family besides your
officer positions? A Yes. I head up now the global capital markets
group for AIG. Yeah. Q. Okay. And are you familiar with an entity
called AIG Matched Funding Corp.? A. Yes. Q. And do you have a
role at Matched [Funding]? A. President and CEO of Matched
[Funding].”); 04/24/2025 Tr. (Kosturos) at 27:4-7 (“Q. And was it Mr.
Stubbs who was responsible for negotiating with the counterparties and
documenting the novations? A. Yes.”).
421
AIG, FP, and Matched Funding are separate legal entities. The
theory that the Former Executives are espousing is akin to piercing
the corporate veil of not one but two corporations. Only FP, not the
Former Executives, has standing to pursue such an action. See, e.g.,
Harrison, 320 F. Supp. 3d at 614-27; Maxus Energy Corp., 571 B.R. at
132
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 132 of 151

b.Continuity of Shareholders
This factor considers whether the shareholders of the
predecessor business own the operator of the successor business
or the transferred assets. In this case, AIG is the sole
shareholder of FP, which was the original owner of the business
and assets. AIG is not, however, the shareholder of Matched
Funding which now owns the assets and manages the business of FP.
Rather, FP is Matched Funding’s sole shareholder.
Therefore, the Court concludes that there is no continuity
of shareholders.
c.Cessation of Business by Seller
FP has effectively ceased its business operations: it is not
winding down any derivatives, it is no longer originating any
derivatives, and it is not engaging in any profit-seeking
activity.
422
The Former Executives contend that FP transferred
660; OODC, 321 B.R. at 136.
422
04/21/2025 Tr. (Habayeb) at 93:14-19 (“Q. In terms of reducing
risk, did FP continue originating or selling complex derivative
products? A. FP stopped doing any third-party business. The
transactions they did were either to - as part of the unwind and
derisking the FP balance sheet or helping with some of the insurance
companies at the time.”), 94:6-9 (“Q. After FP entered wind-down in
late 2008, are you aware of any plan to return FP to profitability?
A. There was no feasible plan at that point to bring it back to
profitability.”); 04/23/2025 Tr. (Stubbs) at 148:14–16 (“Q. So I said
FP’s current operations have very little operational activity. And
you agree with that; right, sir? A. Yes.”); JX-109 at 146, 268
(AIG’s 2022 10-K) (“[FP] has no material operations or businesses and
no employees.”); 04/22/2025 Tr. (Allison) at 53:5–15 (“Q. And if you
go four lines down, you see it says, ‘[FP] has no material operations
or business and no employees.’ Do you see that? A. I see that. Q.
And you believe that’s truthful and correct? A. That’s right. We’ve
got a very small amount of business remaining and, you know, no
133
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 133 of 151

all of its assets except sufficient funds to prosecute its
bankruptcy case,
423
a classic sign that its business has ceased.
424
However, those assets were transferred to its subsidiary so
that FP still retains the ultimate benefit of those assets.
Furthermore, the Bankruptcy Plan contemplates that FP will
continue to exist post-petition.
425
Therefore, the Court
concludes that FP has not ceased its existence, liquidated, or
dissolved for the purposes of this factor.
d.Assumption of Liabilities by Successor
The Former Executives argue that AIG was a party to the
Compensation Plans and well aware that it would succeed to FP’s
liabilities if it received FP’s assets.
426
The Court concludes,
employees. I believe this section is not related to the consolidated
financial statements of [AIG] but is part of a different section in
the 10-K where the standalone financial information of [AIG] is
reported.”).
423
JX-77 at 7 (“[FP’s] Current cash pool balance of $179M will be
reduced to $10M prior to filing.”). See supra notes 353-57 and
accompanying text.
424
See, e.g., Philadelphia Elec. Co. v. Hercules, Inc., 762 F.2d
303, 311–12, 318-19 (3d Cir. 1985) (agreeing that successor liability
may arise all assets are transferred and predecessor is left with a
nominal amount of money to dispose of its expenses in connection with
the transaction but reversing the District Court’s ultimate conclusion
of liability); Knapp v. N. Am. Rockwell Corp., 506 F.2d 361, 369-70
(3d Cir. 1974)) (reversing summary judgment denying successor
liability when seller “disposed of all the assets it originally held,
exclusive of the cash necessary to consummate the transaction”).
425
See supra note 86 and accompanying text.
426
JX-27 at 2 (09/07/2010 summary of 09/03/2010 call between Reilly,
Habayeb, Blake, Button, and Shea) (“There is also a clause in the plan
agreement that if at some point AIG were to ‘transfer all or
substantially all assets’ to another entity then the contract would be
134
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 134 of 151

however, that this does not make AIG liable as a successor to FP,
particularly since the Court has found that FP transferred only
de minimis assets to AIG.
The Former Executives assert nonetheless that AIG has agreed
to assume FP’s liabilities. However, the Court finds that AIG
has only agreed to guarantee obligations owed to the derivative
contracts counterparties.
427
That agreement is insufficient to
establish that AIG has agreed to assume FP’s obligations under
the Compensation Plans, particularly where the language of those
Plans expressly provide that AIG is not assuming FP’s obligations
under the Compensation Plans.
428
Consequently, considering the relevant factors, the Court
concludes that the Former Executives have not presented
legally binding for the new entity and could potentially re-establish
the liability. It is important to make sure participants in the [FP]
‘transition’ are aware of this fact and that no actions trigger the
re-establishment of the DCP/SIP plan liability.”); CCPX-660 at
(10/21/2015 email from Reilly to McIntyre) (stating that prohibition
on intercompany transfers of FP’s assets was likely due to the
successor liability clause in the Compensation Plans and attaching the
09/07/2010 summary); 04/22/2025 Tr. (Allison) at 97:11-16 (“Q. Well,
you spoke to Mr. Shea in connection with the DCP litigation? A. I
did speak with him, yes. Q. And you knew by 2014 Mr. Shea provided
this advice [from JX-27]? A. Mr. Shea provided advice that we should
be careful with sales of AIG FP assets.”).
427
See supra note 407 and accompanying text. See also JX-81 at 3
(stating that “AIG has guaranteed the obligation of all the FP
subsidiaries that have exposures with 3rd parties” including Matched
Funding).
428
JX-2 § 4.01(a) (“The benefits payable hereunder shall constitute
an unsecured debt of AIG Financial Products Corp. to the Participants
and their Beneficiaries and to AIG and shall not have the benefit of
any guarantee by AIG of payment obligations of AIG Financial Products
Corp.”) (emphasis added); CCPX-2 § 4.01(a) (same).
135
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 135 of 151

sufficient evidence to establish that AIG is a mere continuation
of FP or that there was a de facto merger between AIG and FP.
Therefore, the general rule that successor corporations are not
liable for their predecessor’s debt applies.
429
The Former Executives contend, nonetheless, that AIG’s
control of FP and Matched Funding mandates that it be considered
a successor to FP. However, the Court finds that under
Connecticut law, “control” is not an exception to the general
rule that successor corporations are not liable for the debts and
liabilities of their predecessor.
430
Further, “a prerequisite to
the imposition of liability against a corporation under any of
the exceptions to the nonliability of successors is a transfer or
sale of all, or substantially all, the assets of the predecessor
to the successor.”
431
As found above, FP did not transfer all or
substantially all of its assets to AIG.
432
3.Conclusion
For all of the above reasons, the Court concludes that AIG
is not the contractual successor to FP under the Compensation
429
See, e.g., Kuhns Bros, 2008 WL 2167091, at *4; Peglar, 2002 WL
1610037, at *7.
430
Id.
431
See FCI USA, LLC v. Wampus Milford Assocs., LLC, No. X07-HHD-CV-
23-6179725-S, 2024 WL 3873431, at *3 (Conn. Super. Ct. Aug. 13, 2024)
(emphasis added) (quoting 15 Fletcher Cyclopedia of the Law of
Corporations (2023) § 7122).
432
See supra note 403 and accompanying text.
136
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 136 of 151

Plans and that AIG is not a successor to FP under the continuity
of enterprise doctrine. As a result, the Court will grant
judgment in favor of AIG on Count Four of the claims asserted
against it by the Former Executives.
D.Tort Claims
The Former Executives assert two tort claims against AIG:
(1) tortiously interfering with the Compensation Plans by
preventing FP from restoring the Former Executives’ accounts and
(2) a prima facie tort for the 2022 transfers that left FP bereft
of assets, culminating in a bankruptcy filing meant to
subordinate and discharge their claims.
FP disputes the allegations but argues preliminarily that
both claims are barred by the statute of limitations.
1.Statute of Limitations
FP contends that, as the forum, Delaware’s statute of
limitations applies.
433
Under Delaware law, a tort claim,
including one for tortious interference with contract, is subject
to a three-year statute of limitations.
434
Therefore, FP argues
that the Former Executives were required to file suit within
three years after the Compensation Plans were breached or no
433
See, e.g., Winstar Holdings, LLC v. Blackstone Group, LP (In re
Winstar), 435 B.R. 33, 44 (the law of the forum determines whether an
action is barred by the statute of limitations).
434
Del. Code Ann. tit. 10, § 8106(a). Even if Connecticut law
applied, its statute of limitations for tort claims is also three
years. Conn. Gen. Stat. Ann. § 52-577.
137
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 137 of 151

later than December 31, 2016.
435
FP asserts that the Former
Executives first asserted the tort claims when they filed their
Answer, Affirmative Defenses, Counterclaim, and Third Party-
Claims in this adversary proceeding on July 5, 2023.
436
The Former Executives contend that the statute of
limitations has not expired under the continuing tort doctrine.
437

They argue that the evidence established that AIG has been
engaged in a continuous course of conduct from 2008 through 2022
to deprive the Former Executives of their rights under the
Compensation Plans.
The Court concludes that the continuing tort doctrine does
not apply to extend the statute of limitations for the tortious
interference with contract claim. Under Delaware law, a tortious
interference claim arises, and the limitation period begins to
run, when the alleged injury occurs.
438
In this case, the injury
435
For purposes of the Initial Issues only, FP did not contest that
the Compensation Plans were breached. See supra note 271 and
accompanying text.
436
Adv. D.I. 11. While the Former Executives filed suit in
Connecticut State Court in 2019, they did not assert any of the
instant tort claims in that case. Arthurs et al. v. AIG Fin. Prods.
Corp., No. X08-FST-CV-19-6046057-S (Conn. Super. Ct.).
437
See, e.g., Frederick Hsu Living Tr. v. ODN Holding Corp., C.A.
No. 12108, 2017 WL 1437308, at *43 (Del. Ch. Apr. 25, 2017) (“If there
is a continuing wrong, the cause of action is timely so long as the
last act evidencing the continuing wrong falls within the limitation
period.”) (quoting Kerns v. Dukes, No. Civ. A. 1999-S, 2004 WL 766529,
at *4 (Del. Ch. Apr. 2, 2004)).
438
Kaufman v. C.L. McCabe & Sons, Inc., 603 A.2d 831, 834-35 (Del.
1992) (barring the plaintiffs from recovering damages for their tort
claims because they failed to bring those claims within three years of
138
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 138 of 151

to the Former Executives occurred when FP failed to restore their
account balances by the December 31, 2013, deadline because if
their balances were not restored by that date, their right to
them lapsed.
439
A necessary element of a claim for tortious interference
with contract is “an intentional act that is a significant factor
in causing the breach of such contract.”
440
Only actions which
occur before the breach can be a significant factor in causing
the breach. Therefore, any claim the Former Executives have for
tortious interference with their right to restoration of their
accounts had to have been brought within three years of the
breach, namely by December 31, 2016.
441
The Court rejects the Former Executives’ contention that the
continuing wrong doctrine excuses their failure to file their
claim within the statute of limitations. In the breach of
contract context, the doctrine only applies
the alleged injury).
439
JX-2 § 4.01(b) (“to the extent amounts have not been restored by
December 31, 2013, all restoration rights shall permanently lapse
except to the extent AIG Financial Products Corp. determines that it
may amend the Plan to provide for payment of restored amounts without
violating Internal Revenue Code Section 409A.”); CCPX-2 § 4.01(b)
(same). The Former Executives have presented no evidence or argument
that the balances could have been restored without violating the
Internal Revenue Code.
440
See, e.g., Bhole, Inc. v. Shore Inv., Inc., 67 A.3d 444, 453
(Del. 2013).
441
Del. Code Ann. tit. 10, § 8106(a).
139
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 139 of 151

in the limited circumstances in which a breach of
contract claim cannot be alleged at the time of breach
because damages cannot be ascertained at that time. . .
. If a plaintiff could allege a prima facie case for
breach of contract after a single incident, the
doctrine does not apply, even if a defendant engages in
“numerous repeated wrongs of similar, if not same,
character over an extended period.”
442
The Court concludes that the same limitation applies to a
tort claim for tortious interference with contract. Because the
Compensation Plans were breached and damages were ascertainable
on January 1, 2014, the continuing tort doctrine is not
applicable.
443
However, the Court concludes that the prima facie tort claim
of the Former Executives is not barred by the statute of
limitations, because as the Court finds below, AIG took specific
actions which harmed FP and its creditors in 2022.
444
442
See, e.g., Ocimum Biosolutions (India) Ltd. v. AstraZeneca UK
Ltd., C.A. No. N15C-08-168, 2019 WL 6726836, at *14 (Del. Super. Ct.
Dec. 4, 2019) (concluding that continuing wrong doctrine did not apply
because court found that the breach of contract occurred when the
trade secrets were improperly retained at the conclusion of the
contract not with each continuing improper use).
443
See, e.g., Kerns, 2004 WL 766529, at *4 (holding that the statute
of limitations had run because the last act causing the injury
occurred when the City Council passed a resolution expanding the sewer
system, not when the plaintiffs were assessed for the costs of the
expansion); Kirkwood Kin Corp. v. Dunkin’ Donuts, Inc., No. 94C-03-
189-WTQ, 1997 WL 529587, at *8 (Del. Super. Ct. Jan. 29, 1997)
(holding that the last wrongful act occurred at the time the franchise
agreement was renewed at an excessive rate, not each month that the
excessive rent was charged thereafter).
444
This claim was brought on June 7, 2023, within the three-year
statute of limitations for any wrongful act that occurred in 2022.
Del. Code Ann. tit. 10, § 8106(a).
140
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 140 of 151

2.Prima Facie Tort
The Former Executives assert that AIG is guilty of a prima
facie tort because its actions between 2008 and 2022 were
intentional and caused them damage by denying them any recovery
on their claims.
FP preliminarily argues that the doctrine may no longer be
available under Connecticut law.
445
The Court concludes, however,
that the doctrine does remain viable under Connecticut caselaw.
446

Even the Deutsch Court, on which FP relies, analyzed the facts of
that case to determine whether the plaintiff stated a claim for a
prima facie tort.
447
The Deutsch Court also noted that the
Connecticut Supreme Court, in Connor v. Connelly, had applied the
standard for a prima facie tort without naming it.
448
That
445
See Deutsch v. Backus Corp., No. X07CV106022074S, 2012 WL
1871398, at *10 (Conn. Super. Ct. May 2, 2012) (stating that “[i]t is
not entirely clear whether the appellate courts of this state would
recognize prima facie tort as a viable cause of action.”).
446
See, e.g., Perry v. Perry, No. UWYCV126022945, 2015 WL 5981005,
at *4-6 (Conn. Super. Ct. Sept. 15, 2015) (acknowledging the existence
of the prima facie tort doctrine but concluding plaintiff had failed
to establish that the defendants’ conduct amounted to a prima facie
tort); McGuire v. Hudson Valley Bank, N.A., No. FSTCV136018303S, 2013
WL 6671307, at *4 (Conn. Super. Ct. Nov. 20, 2013) (holding that the
plaintiff had failed to state a claim for prima facie tort because the
plaintiff did not allege that the defendants acted with intent to
cause harm to the plaintiff) (citing Deutsch, 2012 WL 1871398).
447
Deutsch, 2012 WL 1871398, at *10-11.
448
Id. (“[P]rima facie tort first appears in Connecticut in Connors
v. Connolly, 86 Conn. 641, 647, 86 A. 600 (1913). The court did not
expressly use the term ‘prima facie tort,’ but stated, ‘[t]hese facts
shown [that the plaintiff suffered damage in the loss of his
employment, and that this damage was intentionally caused], a prima
facie cause of action was made out against those who, thus acting with
141
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 141 of 151

seminal case has not been reversed and remains good law.
449
FP asserts nonetheless that no prima facie tort has been
established because AIG acted justifiably and appropriately in
protecting its economic interests vis a vis FP and had neither an
improper motive nor used improper means.
The doctrine of prima facie tort imposes liability for a
“harm that was intentionally inflicted, even though the conduct
does not come within the requirements of one of the well-
established and named intentional torts.”
450
Some courts have
stricken prima facie tort claims if other traditional tort claims
are available to the plaintiff.
451
Because no other tort claim
intent, caused the damage. Recovery, however, might be defeated by
the establishment by these persons of a justification, the burden
being upon them to do so.’”).
449
See Brandt v. Walker Digit., LLC, No. X08CV0194566, 2004 WL
2757440, at *6 (Conn. Super. Ct. Nov. 1, 2004) (“[T]he Connecticut
Supreme Court recognized a cause of action [for prima facie tort]
‘against those who, . . . acting with intent, caused . . . damage.
Recovery, however, might be defeated by the establishment by these
persons of a justification, the burden being upon them to do so.’ . .
. There is no case that overrules or diminishes this authority, and
it remains good law in Connecticut.”) (quoting Connors v. Connolly, 86
A. 600 (Conn. 1913)).
450
Restatement (Second) of Torts § 870 (1979). See also Ballard v.
Hartford Life Ins. Co., No. CV095031857S, 2011 WL 522793, at *5 (Conn.
Super. Ct. Jan. 18, 2011) (recognizing the prima facie tort doctrine);
Choy v. Boyne, No. CV065005693, 2006 WL 3692067, at *1 (Conn. Super.
Ct. Nov. 30, 2006) (same).
451
Stevens v. Kahlily, HHDCV176082965S, 2019 WL 4668156, at *3
(Conn. Super. Ct. Aug. 21, 2019) (dismissing prima facie tort claims
because other tort claims were pled, noting it “was never intended to
be used to evade the elements or defenses required of traditional
torts”) (citation omitted). See also Deutsch, 2012 WL 1871398, at
*12-13 (recognizing that there is a split of authority on the issue
but striking the prima facie tort count in that case because several
142
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 142 of 151

remains, the Court addresses the merits of the Former Executives’
claim.
The Former Executives contend that all of the actions taken
by AIG vis a vis FP form the basis of a prima facie tort. As the
Court has found above, AIG controlled FP’s board and its top
employees (several of whom were also AIG employees).
452
AIG used
that control to cause FP to enter into the FP Revolver and to pay
billions in interest on what the Court has concluded was really
an equity investment.
453
AIG further caused FP to wind down its
business operations in a manner designed to reduce losses and
generate cash to repay AIG, but not to generate any new
business.
454
The Former Executives also presented evidence that AIG
continued its control over FP in January 2022, by suggesting the
two persons who were to serve as independent directors and
members of FP’s Special Committee to consider its strategic
other torts survived the motion to strike); Ballard, 2011 WL 522793,
at *5 (dismissing prima facie tort claim because a negligence claim
was pled); Choy, 2006 WL 3692067, at *1 (dismissing prima facie tort
claim because a tort claim for defamation was also alleged). But see
Brandt, 2004 WL 2757440, at *7 (denying motion to strike prima facie
tort claim even though a claim for tortious interference with contract
was also pled).
452
See supra notes 29-33 and accompanying text.
453
See supra notes 26, 151, 154, 315-17 and accompanying text. See
also JX-1, JX-86.
454
See supra notes 27-28 and accompanying text.
143
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 143 of 151

alternatives.
455
AIG’s counsel also told the Special Committee
its preferred course of action: a bankruptcy filing by FP in
which “any DCP claims would be expressly non-guaranteed,
unsecured, and subordinated.”
456
During 2022, the Special
Committee authorized several transactions (offsetting
intercompany balances, transferring assets to Matched Funding,
and several transfers to AIG) which the Former Executives contend
were done to benefit AIG and caused harm to FP and them.
457
AIG is liable for a prima facie tort if it acted
intentionally, without justification, and caused damage to the
Former Executives with respect to those transactions.
458
455
See supra note 68 and accompanying text.
456
See supra note 67 and accompanying text. See also CCPX-709 at 3
(Weil FP Contingency Planning: Discussion Materials).
457
See, e.g., 01/31/2024 Allison Dep. at 202:2-5 (“A. Was there any
other reason to do the novations? Best reason was for the bankruptcy
planning.”). See also CCPX-836 at 2 (12/13/2022 email from Hirsch to
Fitzsimons) (“Transferring these transactions to an FP sub [Matched
Funding] and a sister company, [Markets], minimizes disruption to our
counterparties and AIG. These actions coupled with the bankruptcy
filing likely gives us credibility and leverage in going back to our
counterparties to negotiate terminations on the best possible terms
available.”).
458
Restatement (Second) of Torts § 870 (1979). See also Connors v.
Connolly, 86 A. 600, 602 (Conn. 1913) (concluding that “a prima facie
cause of action was made out against those who, thus acting with
intent, caused the damage. Recovery, however, might be defeated by
the establishment by these persons of a justification”); Brandt, 2004
WL 2757440 at *6 (same and rejecting contention that the tortious act
must also be against public policy).
144
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 144 of 151

a.Offset Transactions
The Court concludes that the offsetting transactions,
described more fully in Part B above, do not constitute a prima
facie tort for the following reasons.
First, the Special Committee authorized FP to perform the
offsetting transactions; AIG did not.
459
As the Court found
above, the offsets did not remove any assets from FP but were
simply a means to simplify FP’s balance sheet.
460
Therefore, the
Court concludes that the offsets did not injure FP or its
creditors. Nor were the offsets done by improper means; many
companies do such offsets frequently to reflect more accurately
their financial condition.
461
Because the offsetting transactions
459
See supra note 71 and accompanying text. See also 04/24/2025 Tr.
(Kosturos) at 20:1-3 (“Q. Did AIG direct FP to engage in these
intercompany offset transactions? A. No.”).
460
See supra notes 71-72, 332-35 and accompanying text. See also
04/24/2025 Tr. (Kosturos) at 20:4-15 (“Q. Did FP transfer away any
assets or value in any intercompany offset transaction? A. No, they
didn’t. Q. Did any of the transactions change the net equity of FP
on either a standalone or consolidated basis? A. No. Q. Was there
a benefit to FP from doing these intercompany offset transactions? A.
Yes. Q. And what was it? A. First of all, to clean up its balance
sheet and to make a more fair representation of its balance sheet.”).
461
04/24/2025 Tr. (Dubel) at 106:14-20 (“Q. And why did the Special
Committee approve those intercompany offset transactions? A. Well,
there was several reasons. Number one, it was something that I find
not uncommon to do before a company goes into Chapter 11 is you want
to simplify your balance sheet. A lot of these were just situations
that were easy to offset, and so that was important.”), 112:19-23 (“Q.
And based on your years of restructuring experience, is this kind of
intercompany offset transactions [sic] rare or uncommon in a company
that’s restructuring? A. No, it’s not uncommon at all. Some
companies deal with these every year, every quarter, what have you. .
. . And it’s something I’ve done in the past, in my past deals to, in
essence, simplify the balance sheet to avoid the extensive costs
145
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 145 of 151

were not wrongful or harmful, the Court concludes that they do
not provide a basis for the Former Executives’ prima facie tort
claim against AIG.
462
b.Transfers to Matched Funding
The Special Committee of FP also authorized the transfer of
94 derivative contracts (and related cash and bonds) to FP’s
subsidiary, Matched Funding.
463
The Court finds that FP
transferred these assets to Matched Funding to shelter their
value from the losses that would occur in the event of a
bankruptcy filing.
464
Because the transfers were to a subsidiary
involved in a Chapter 11 process.”). See also 04/24/2025 Tr.
(Kosturos) at 17:8-10 (“Pinestead had finished its operations and
effectively needed to be consolidated into FP via these offset
transactions.”), 19:7-13 (“Q. In addition to this Pinestead
transaction, did FP engage in other offset transactions with other
subsidiaries? A. Yes. Q. And were those offset transactions
structured in a substantially similar manner to the Pinestead
transaction we just talked about? A. Yes, they were.”).
462
See, e.g., Perry, 2015 WL 5981005, at *4-6; McGuire, 2013 WL
6671307, at *4. See also Restatement (Second) of Torts § 870 (1979);
Connors, 86 A. at 602.
463
See supra note 73 and accompanying text. See also (04/24/2025
Tr. (Kosturos) at 27:4-11 (“Q. And was it Mr. Stubbs who was
responsible for negotiating with the counterparties and documenting
the novations? A. Yes. Q. Under whose direction was Mr. Stubbs
acting? A. The Special Committee of FP. Q. Did AIG direct FP to
novate any of these derivatives? A. No.”); JX-78 (10/31/2022
Unanimous Written Consent in Lieu of Meeting of Directors of [FP]
approving $35 million cash transfer to Matched Funding). FP’s
professionals advised the Special Committee regularly on the status of
the novations. See generally JX-64, JX-67, JX-70, JX-71, JX-73
(minutes of Special Committee meetings throughout the second half of
2022).
464
See supra notes 343-47 and accompanying text. See also JX-51 at
13 (04/13/2022 A&M Update to the Special Committee of the Board
presentation) (showing potential losses of $163 to $510 million if FP
146
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 146 of 151

of FP, the Court concludes that the value was preserved for FP’s
benefit.
465
Thus, the Court concludes that the transfers to
Matched Funding were not done with an improper motive or by
improper means and did not cause any injury to FP or its
creditors and can form no basis for the Former Executives’ prima
facie tort claim.
466
c.$127 Million Transfer to AIG
On the eve of FP’s bankruptcy filing, AIG removed $127
million of FP’s cash in the intercompany cash pool and offset it
against the FP Revolver’s balance.
467
The Court concludes that AIG used improper means to remove
the $127 million from the intercompany cash pool. As discussed
above, AIG took cash that belonged to FP, contrary to the terms
of the cash pool sharing agreement and the specific requests of
FP.
468
Doing so left just $10 million for FP to operate in
retained the derivatives and filed for bankruptcy versus losses of
only $6 million if FP novated the derivatives). See also 11 U.S.C. §§
362(b)(7), 546(e) & 560.
465
See supra note 346 and accompanying text.
466
See, e.g., Perry, 2015 WL 5981005, at *4-6; McGuire, 2013 WL
6671307, at *4. See also Restatement (Second) of Torts § 870 (1979);
Connors, 86 A. at 602.
467
See supra notes 353-54 and accompanying text.
468
See supra notes 77-81, 353-54, 356 and accompanying text. See
also JX-84 at 1 (12/14/2022 email from Carbone to Allison) (“This
email will confirm that [AIG] has offset the full amount of the
intercompany cash pool receivable owed by [AIG] to FP against the
amount of the intercompany payable owed by FP to [AIG] The balance in
this account as of Dec 13, 2022 was $126,877,725.25.”).
147
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 147 of 151

bankruptcy.
469
The Court finds that this harmed FP and its
creditors by depriving FP of funds it owned. The Court also
finds sufficient evidence that AIG took these actions for an
improper motive: to strip FP of assets before its bankruptcy
filing so that there would be no possibility of a recovery for
the Former Executives.
470
Therefore, the Court concludes that
AIG’s action in setting off $127 million of FP’s cash against the
FP Revolver was a prima facie tort.
471
FP contends, however, that it has obtained the agreement of
AIG for a tolling of the statute of limitations for FP to recover
any claims that it may have against AIG, including any claim for
recovery of FP’s assets that may have been transferred to AIG.
The Court rejects FP’s argument. The Court has determined
above that AIG’s claim must be recharacterized as equity and
equitably subordinated to the claims of the Former Executives.
469
See supra note 82 and accompanying text. CCPX-819 (12/4/22 email
from Carbone attaching draft powerpoint on FP update) at 4-5 (“$10M
for FP related expenses while in bankruptcy. . . . Current AIG cash
pool balance of $179M will be reduced to $10M prior to filing.”).
470
CCPX-709 at 3 (“At present, a chapter 11 bankruptcy filing by FP
is a viable strategy for resolving [the Compensation Plan
litigation]. In an FP bankruptcy, any DCP claims would be expressly
non-guaranteed, unsecured, and subordinated”). CCPX-819 at 4-5; CCPX-
827 at 1 (12/07/2022 email from Hirsch to Allison and others referring
to FP’s funds in the cash pool) (“We should [discuss] timing of the
35M move [of FP’s funds in cash pool to Matched Funding]. . . . In
other words it’s not FP’s money to spend it’s AIG’s”); D.I. 6 at 17
(giving the Former Executives $1 million dollars if they accept the
plan that would discharge their deferred compensation claims, and
nothing if they reject the plan).
471
Connors, 86 A. at 602. See also Restatement (Second) of Torts §
870 (1979).
148
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 148 of 151

Therefore, the prima facie tort claim may inure to the benefit of
the Former Executives and other creditors of the estate. At any
rate, the agreement reached between FP and AIG does not justify
AIG’s actions or create a defense to the Former Executive’s prima
facie tort claim.
d.$253 Million Overpayment to Markets
The Former Executives also contend that AIG’s refusal to
compensate FP for its prior payment of $253 million in costs
incurred by AIG’s subsidiary, AIG Markets, is a prima facie
tort.
472
The Court concluded above that AIG’s action with respect to
this claim by FP was not inequitable conduct because the Former
Executives presented no evidence that AIG had a legal obligation
to pay FP for AIG Market’s debts or even to engage with FP on its
allegation of overpayment.
473
For the same reasons, the Court
concludes that the Former Executives have failed to establish
that AIG’s actions support their prima facie tort claim.
474
e.$154 Million Deferred Tax Asset
The Former Executives also contend that AIG’s actions in
placing a reserve on FP’s $154 million tax asset supports their
472
See supra note 358 and accompanying text.
473
See supra notes 358-60 and accompanying text.
474
See, e.g., Perry, 2015 WL 5981005, at *4-6; McGuire, 2013 WL
6671307, at *4. See also Restatement (Second) of Torts § 870 (1979);
Connors, 86 A. at 602.
149
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 149 of 151

prima facie tort claim.
475
The Court has already concluded that the reserve placed on
FP’s tax asset did not cause any harm to FP or its creditors.
476

Therefore, the Court concludes that AIG’s action in placing a
reserve on the FP tax asset does not provide any support for the
Former Executives’ prima facie tort claim.
477
3.Conclusion
For the reasons stated above, the Court concludes that the
claim of the Former Executives against AIG for tortious
interference with contract is barred by the statute of
limitations. However, the Court concludes that the Former
Executives have proven a claim for a prima facie tort against AIG
for its actions in taking $127 million of FP’s funds from the
intercompany cash pool. Accordingly, the Court will grant
judgment in favor of the Former Executives on Count Two of their
claim against AIG for such damages that may be proven were caused
by that transfer.
475
See supra notes 361-64 and accompanying text.
476
See supra note 365 and accompanying text.
477
See, e.g., Perry, 2015 WL 5981005, at *4-6; McGuire, 2013 WL
6671307, at *4. See also Restatement (Second) of Torts § 870 (1979);
Connors, 86 A. at 602.
150
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 150 of 151

IV.CONCLUSION
For the foregoing reasons, the Court will enter judgment (1)
against FP and AIG on Count One of the Complaint, and in favor of
the Former Executives on their Counterclaim against FP and AIG,
declaring that the advances made by AIG under the FP Revolver are
equity, not debt (Recharacterization) and (2) in favor of the
Former Executives and against AIG on Counts One (Equitable
Subordination) and Two (Prima Facie Tort) of their Claims against
AIG. The Court will grant judgment in favor of AIG on Counts
Three (Tortious Interference with Contractual Relations) and Four
(Successor Liability).
The Court will issue an Order consistent with this Opinion.
Dated: August 14, 2026BY THE COURT:
Mary F. Walrath
United States Bankruptcy Judge
151
Case 23-50110-MFW Doc 228 Filed 08/14/26 Page 151 of 151