UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF MICHIGAN 

KEVIN J. MURRAY 

 CIVIL NO. 08-15147 

 Plaintiff, 

 HON. LAWRENCE P. ZATKOFF 

 -vs- MAG. JUDGE MONA K. MAJZOUB 

TIMOTHY F. GEITHNER, Secretary, U.S. 

Department of Treasury, and BOARD OF 

GOVERNORS OF THE FEDERAL 

RESERVE SYSTEM, 

 Defendants. 

 / 

DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

 Defendants Timothy F. Geithner, Secretary of the United States Department of the 

Treasury, and the Board of Governors of the Federal Reserve System, through their undersigned 

counsel, hereby move for summary judgment pursuant to Fed. R. Civ. P. 56(b). This motion is 

supported by the attached brief. Concurrence in the relief that is sought by this motion was 

requested on Tuesday, June 1, 2010 and was not obtained. 

 Respectfully submitted, 

 TONY WEST 

 Assistant Attorney General 

 BARBARA L. MCQUADE 

 United States Attorney 

 JOHN R. GRIFFITHS 

 Assistant Director, Federal Programs Branch 

 

 /s/ John R. Coleman 

JOHN R. COLEMAN 

JULIE STRAUS 

 Trial Attorneys, U.S. Department of Justice 

 Civil Division, Federal Programs Branch 

 20 Massachusetts Ave., N.W., Room 6118 

Case 2:08-cv-15147-LPZ-MKM Document 67 Filed 06/07/10 Page 1 of 29
 Washington, D.C. 20530 

 Telephone: (202) 514-4505 

 Facsimile: (202) 616-8460 

 Email: John.Coleman3@usdoj.gov

 

DATED: June 7, 2010 

Case 2:08-cv-15147-LPZ-MKM Document 67 Filed 06/07/10 Page 2 of 29
UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF MICHIGAN 

KEVIN J. MURRAY 

 CIVIL NO. 08-15147 

 Plaintiff, 

 HON. LAWRENCE P. ZATKOFF 

 -vs- MAG. JUDGE MONA K. MAJZOUB 

TIMOTHY F. GEITHNER, Secretary, U.S. 

Department of Treasury, and BOARD OF 

GOVERNORS OF THE FEDERAL 

RESERVE SYSTEM, 

 Defendants. 

 / 

BRIEF IN SUPPORT OF DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

Case 2:08-cv-15147-LPZ-MKM Document 67 Filed 06/07/10 Page 3 of 29
ISSUE PRESENTED

 Whether the Emergency Economic Stabilization Act of 2008, as applied to the Secretary 

of the Treasury’s purchase of American International Group, Inc. preferred stock, had either the 

predominant purpose or the primary effect of establishing religion. 

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MOST PERTINENT AUTHORITY 

Mitchell v. Helms, 530 U.S. 793 (2000) 

Agostini v. Felton, 521 U.S. 203 (1997) 

Am. Atheists, Inc. v. City of Detroit Downtown Dev. Auth., 567 F.3d 278 (6th Cir. 2009) 

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TABLE OF CONTENTS

INTRODUCTION .............................................................1

BACKGROUND ..............................................................2

I. The Emergency Economic Stabilization Act of 2008 ......................2

II. The Secretary Purchased AIG Preferred Stock Pursuant to the EESA to Protect

the Economy and the Taxpayers ......................................3

III. The Treasury Department Has Not Provided EESA Funds to Any Entity That 

Markets Shariah-Compliant Products ..................................7

IV. AIG Has Not Provided EESA Funds to Any Entity that Markets ShariahCompliant Products ................................................7

V. The Lone Shariah-Compliant Insurance Product Offered in the United States by

Subsidiaries of AIG Has Made A De Minimis Contribution to AIG’s Consolidated

Results And is Very Similar to Traditional Insurance Policies . . . . . . . . . . . . . . . 8

VI. The Shariah-Compliant Products Offered by Foreign Subsidiaries in Majority

Muslim Nations Have Made a De Minimis Contribution to AIG’s Consolidated

Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

VII. Treasury Department Officials Have Had No Involvement in AIG’s Subsidiaries’

Sale of Shariah-Compliant Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

STANDARD OF REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

I. The Government Acted With A Valid Secular Purpose in Enacting and

Implementing the EESA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II. The Treasury Department’s Purchase of AIG Preferred Stock Has Not Had the

Primary Effect of Advancing the Islamic Religion . . . . . . . . . . . . . . . . . . . . . . . 13

A. The Treasury Department’s Purchase of AIG Preferred Stock Has Not Led

to Religious Indoctrination that Could Reasonably Be Attributed to the

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

B. The TARP Does Not Define Its Recipients By Reference to Religion . . 19

C. The Treasury Department’s Purchase of AIG Preferred Stock Has Not

Created an Excessive Entanglement Between Government and Religion 20

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CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

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1 

INTRODUCTION 

 In the fall of 2008, this nation confronted the most severe financial panic since the Great 

Depression. The federal government took unprecedented measures to address this panic, 

providing trillions of dollars of credit and, pursuant to the Emergency Economic Stabilization 

Act of 2008 (“EESA”), purchasing hundreds of billions of dollars of assets from hundreds of 

domestic financial institutions. These extraordinary actions were undertaken for a single 

purpose: to protect the American economy. Appropriately, these actions have been the subject of 

intense scrutiny, and, at times, vigorous debate. 

 But, as the record in this case demonstrates, plaintiff’s claim—that the Secretary of the 

Treasury (the “Secretary”) violated the Establishment Clause by investing in American 

International Group, Inc. (“AIG”) pursuant to the EESA—is not worthy of debate. The sole 

basis of plaintiff’s claim is the fact that among AIG’s hundreds of direct and indirect 

subsidiaries, a handful (most of which operate in majority Muslim nations) offer Shariahcompliant insurance products (i.e., insurance products that are consistent with Islamic law). 

Together these products account for less than 0.01% of AIG’s total consolidated revenue. No 

reasonable observer could conclude, on this basis, that the Secretary’s investment in AIG had 

either the predominant purpose or the primary effect of advancing religion. None of the funds 

provided to AIG pursuant to the EESA have been used even indirectly to promote the sale of 

these products, and no official of the United States Department of the Treasury (“Treasury 

Department”) has been involved in the sale of these products in any manner. The Secretary’s 

purpose in investing in AIG was to spare the economy from the consequences of AIG’s failure, 

and that has been the investment’s primary effect. Accordingly, defendants are entitled to 

summary judgment. 

 

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2 

BACKGROUND 

I. The Emergency Economic Stabilization Act of 2008

 Congress enacted the EESA on October 3, 2008. See Pub. L. No. 110-343, Div. A, 122 

Stat. 3765 (2008) (codified as amended at 12 U.S.C. § 5201 et seq.). Congress’s stated purpose 

was: 

[T]o immediately provide authority and facilities that the Secretary of the 

Treasury can use to restore liquidity and stability to the financial system of the 

United States . . . in a manner that (A) protects home values, college funds, 

retirement accounts, and life savings; (B) preserves homeownership and promotes 

jobs and economic growth; (C) maximizes overall returns to the taxpayers of the 

United States; and (D) provides public accountability for the exercise of such 

authority. 

12 U.S.C. § 5201. Likewise, the legislative history is clear that the bill was designed to respond 

to “a real crisis situation that could mushroom into something worse than the Great Depression.” 

See 154 Cong. Rec. H10361 (Statement of Rep. Watt); see also 154 Cong. Rec. S10220-283 

(Senate Debate of Oct. 1, 2008); 154 Cong. Rec. H10712-806 (House Debate of Oct. 2, 2008). 

 To accomplish this purpose, the EESA provides the Secretary of the Treasury (the 

“Secretary”) with the authority “to establish the Troubled Asset Relief Program (or ‘TARP’) to 

purchase, and to make and fund commitments to purchase, troubled assets from any financial 

institution, on such terms and conditions as are determined by the Secretary.” 12 U.S.C. 

§ 5211(a)(1). The EESA defines “troubled assets” as, inter alia, “financial instrument[s] that the 

Secretary, after consultation with the Chairman of the Board of Governors of the Federal 

Reserve System, determines the purchase of which is necessary to promote financial market 

stability.” Id. at § 5202(9)(B). In exercising this authority, the Secretary must “take into 

consideration” several goals, including, inter alia, “protecting the interests of taxpayers;” 

“providing stability and preventing disruption to financial markets in order to limit the impact on 

the economy and protect American jobs, savings, and retirement security;” and “ensuring that all 

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3 

financial institutions are eligible to participate in the program, without discrimination based on 

size, geography, form of organization, or the size, type, and number of assets eligible for 

purchase.” Id. at § 5213. 

 The Secretary’s authority to purchase troubled assets is limited to approximately $700 

billion outstanding at any one time. Id. at § 5225. As of April 30, 2010, the Secretary has 

purchased, or made commitments to purchase, approximately $490 billion of troubled assets 

from over 700 different financial institutions. Millstein Decl. ¶ 7. Of this amount, $206 billion 

has already been repaid, and a March 2010 report of the non-partisan Congressional Budget 

Office estimates that the total cost of the TARP will ultimately be $109 billion, far less than the 

nearly $700 billion authorized by Congress. Id. The Secretary’s authority to purchase troubled 

assets expires on October 3, 2010. 12 U.S.C. § 5230. 

 The TARP is subject to numerous reporting requirements, id. at § 5215,1

 and the 

oversight of the relevant Congressional committees, the specially-created Congressional 

Oversight Panel (“COP”), id. at § 5233, the Comptroller General, id. at § 5226, and the Special 

Inspector General for the TARP (“SIGTARP”). Id. at § 5231.2

 In addition, the actions of the 

Secretary pursuant to the EESA are subject to limited judicial review. Id. at § 5229. 

II. The Secretary Purchased AIG Preferred Stock Pursuant to the EESA to Protect the 

Economy and the Taxpayers 

 The basic facts surrounding the government’s assistance to AIG are a matter of public 

record. In September 2008, “for the first time in 80 years, the United States risked a complete 

collapse of our financial system.” The Federal Bailout of AIG: Hearing Before the H. Comm. on 

Oversight & Gov’t Reform, 111th Cong. (Jan. 27, 2010) (written testimony of Timothy F. 

 

1

  These reports are available at http://www.financialstability.gov/latest/reportsanddocs.html. 2

   Reports and hearing testimony issued by these oversight bodies are publically available at the 

committees’ websites, the COP’s website (http://cop.senate.gov); the GAO’s website (www.gao.gov); and 

the SIGTARP’s website (http://www.sigtarp.gov/), respectively. 

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4 

Geithner, Secretary of the Treasury) (Ex. A to Coleman Decl.) (hereinafter “Geithner 1.27.10”). 

This crisis accelerated through the first two weeks of September 2008, causing the failure of 

Lehman Brothers, and threatening the failure of AIG. Id. at 2-4. At the time, AIG was one of 

the world’s largest and most complex financial institutions. Id. at 2. AIG and its subsidiaries 

had roughly $1 trillion in assets, tens of millions of individual and corporate customers, and 

contractual relationships across the financial industry. Id. at 2-3. Officials of the Federal 

Reserve System, in consultation with officials of the Treasury Department, “concluded that 

AIG’s failure would be catastrophic” for the United States’ and world economy. Id. at 4-5; see 

also Millstein Decl. ¶¶ 3, 4. 

 After the attempt to organize a private-sector rescue failed, these officials “determined 

that it was in the best interests of the United States to rescue AIG in order to slow the panic and 

prevent further damage to our economy.” Geithner 1.27.10 at 5-6; see also Herzog Decl. ¶¶ 10-

15. As a result, on September 16, 2008, the Federal Reserve Bank of New York (“FRBNY”), 

with the authorization of the Federal Reserve Board, agreed to extend up to $85 billion in credit 

to AIG pursuant to the Section 13(3) of the Federal Reserve Act, 12 U.S.C. § 343, the only 

mechanism then available for providing government financial assistance to an institution like 

AIG. Geithner 1.27.10 at 7; Millstein Decl. ¶ 5.3

 

 Even after the FRBNY’s provision of credit, however, “AIG remained extremely 

vulnerable to the ongoing and intensifying financial crisis.” Id. at 8. “Falling asset prices 

generated both substantial losses on its balance sheet and increases in required payments to 

AIG’s counterparties under the terms of its credit protection contracts.” Id. As a result, AIG 

faced the distinct possibility that the announcement of its third quarter results would result in a 

 

3

 The constitutionality of the Federal Reserve Act—either facially or as applied to this transaction—is not 

challenged by plaintiff. See First Am. Compl. ¶ 1 (“This civil rights action is an as-applied challenge to 

the [EESA]. . . .”). 

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5 

downgrade of its credit rating, which would further undermine confidence in its insurance 

subsidiaries and require additional payments to its counterparties. Id.; see also Millstein Decl. 

¶ 9. As former Secretary Paulson recently explained: 

Unfortunately, [the FRBNY’s provision of credit] did not sufficiently abate the 

problems at AIG. The company faced mounting losses, and it faced potential 

ratings downgrades which would trigger tens of billions of dollars in collateral 

calls which, without an equity infusion, would have led to its failure—a failure 

that would have collapsed our financial system and devastated millions of 

Americans. 

The Federal Bailout of AIG: Hearing Before the H. Comm. on Oversight & Gov’t Reform, 111th 

Cong. (Jan. 27, 2010) (written testimony of Henry M. Paulson, Jr., former Secretary of the 

Treasury, at 1) (Ex. B to Coleman Decl.) (hereinafter “Paulson 1.27.10”); see also Millstein 

Decl. ¶ 9. 

To avoid this collapse, the Treasury Department agreed, as part of a larger restructuring 

of AIG’s balance sheet, to invest $40 billion in AIG pursuant to the newly-enacted EESA, on the 

condition that AIG use the proceeds solely to pay down its indebtedness with the FRBNY. 

Millstein Decl. ¶ 10. Accordingly, on November 25, 2008, AIG sold $40 billion of Series D 

Preferred Stock to the Treasury Department, and the entire $40 billion was paid directly to the 

FRBNY. Id.; Gender Decl. ¶ 10. “The combined actions of Treasury and the Fed were effective. 

Despite AIG’s breathtaking third-quarter losses, the company did not fail, and we avoided the 

disastrous consequences that would have accompanied such a failure.” Paulson 1.27.10, at 2; see 

also Millstein Decl. ¶ 11. 

 AIG continued to suffer extraordinary losses, however, and as the company prepared to 

announce its results for the fourth quarter of 2008, it again faced the possibility of a calamitous 

ratings downgrade. Millstein Decl. ¶ 12. On March 2, 2009, when AIG reported a net loss of 

$61.7 billion for the fourth quarter of 2008, the Treasury Department “announced a [further] 

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6 

restructuring of the government’s assistance to AIG in order to stabilize this systemically 

important company in a manner that best protects the US taxpayer.” Id. at ¶ 13. As the Treasury 

Department explained: 

Given the systemic risk AIG continues to pose and the fragility of markets today, 

the potential cost to the economy and the taxpayer of government inaction would 

be extremely high. AIG provides insurance protection to more than 100,000 

entities including small businesses, municipalities, 401(k) plans, and Fortune 500 

companies who together employ over 100 million Americans. AIG has over 30 

million policyholders in the U.S. and is a major source of retirement insurance 

for, among others, teachers and non-profit organizations. The company also is a 

significant counterparty to a number of major financial institutions. 

Id. at ¶ 14. Accordingly, on April 17, 2009, the Treasury Department entered into an agreement 

to purchase AIG Series F Preferred Shares pursuant to the EESA (“Series F SPA”). Id. at ¶ 16. 

The Series F SPA creates an equity capital commitment (“Commitment”) of just under $30 

billion, which allows AIG to draw capital from the Commitment over time in exchange for an 

increase in the liquidation preference of the Series F Preferred Shares. Id.

Decl.). In short, AIG advised the Treasury Department that it would use funds drawn from the 

Commitment for purposes that are entirely secular—and it has. 

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7 

III. The Treasury Department Has Not Provided EESA Funds to Any Entity That 

 Markets Shariah-Compliant Products 

 As noted, the Treasury Department paid the $40 billion purchase price for the Series D 

Preferred Stock directly to the FRBNY. Gender Decl. ¶ 10. Funds drawn from the Commitment 

are paid directly to AIG, “and decisions regarding whether and how to further distribute funds 

drawn from the Commitment to any of AIG’s subsidiaries are made by AIG, not by the Treasury 

Department.” Millstein Decl. ¶ 17. 

 Thus, the Treasury Department has not provided funds to any entity that 

markets Shariah-compliant products, nor is there evidence that Treasury Department officials 

were even aware that AIG’s subsidiaries marketed Shariah-compliant insurance products. 

Millstein Decl. ¶ 28. 

IV. AIG Has Not Provided EESA Funds to Any Entity that Markets Shariah-

 Compliant Products 

 According to its most recent Form 10-K filing with the Securities and Exchange 

Commission, AIG has approximately 290 direct and indirect subsidiaries that operate around the 

world. Coleman Decl. ¶¶ 4-5; AIG Subsidiaries (Ex. C to Coleman Decl.). 

 

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8 

 

V. The Lone Shariah-Compliant Insurance Product Offered in the United States by

 Subsidiaries of AIG Has Made A De Minimis Contribution to AIG’s Consolidated 

 Results And is Very Similar to Traditional Insurance Policies 

By way of comparison, AIG’s insurance subsidiaries generated $64.702 billion in premiums and 

other consideration in fiscal year 2009 alone. See Coleman Decl. ¶ 8. Thus, even assuming a 

comparable time period, this product contributed less than to AIG’s gross premiums on 

a consolidated basis. 

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9 

 

VI. The Shariah-Compliant Products Offered by Foreign Subsidiaries in Majority 

 Muslim Nations Have Made a De Minimis Contribution to AIG’s Consolidated 

 Results 

 

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10 

VII. Treasury Department Officials Have Had No Involvement In AIG’s Subsidiaries’ 

 Sale of Shariah-Compliant Products 

 Notwithstanding the Treasury Department’s significant investment in AIG and its 

officials’ interaction with the management of AIG regarding AIG’s restructuring plans, these 

officials have not had any conversations with officials or employees of AIG about AIG’s 

subsidiaries’ sale of Shariah-compliant insurance products. Millstein Decl. ¶ 28. 

 Indeed, Jim Millstein, the Treasury Department official with primary 

responsibility for monitoring the Treasury Department’s investment in AIG, was not even aware 

that AIG’s subsidiaries offered these products until he was contacted regarding this lawsuit in 

October 2009. Millstein Decl. ¶¶ 1, 28; see also Hsu Depo. at 37-39 (former Treasury 

Department official involved in Series F transaction did not know AIG subsidiaries offered 

Shariah-compliant products until contacted about this lawsuit) (Ex. J to Coleman Decl.) 

STANDARD OF REVIEW 

Summary judgment is appropriate if the answers to the interrogatories, depositions, 

admissions, and pleadings, combined with any affidavits in support, show that no genuine issue 

as to any material fact remains and that the moving party is entitled to a judgment as a matter of 

law. See Fed. R. Civ. P. 56(c). A factual dispute is material if its resolution “might affect the 

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11 

outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 

248 (1986) (citations omitted). By contrast, “[f]actual disputes that are irrelevant or 

unnecessary” will not preclude the entry of summary judgment. Id. (citations omitted). Further, 

a dispute over a material fact is “genuine” only “if the evidence is such that a reasonable jury 

could return a verdict for the nonmoving party.” Id. Thus, “[w]hen the moving party has carried 

its burden under Rule 56(c), its opponent must do more than show that there is some 

metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 

475 U.S. 574, 586 (1986) (citations omitted). In sum, “[w]here the record taken as a whole could 

not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for 

trial.’” Id. at 587 (citations omitted). 

ARGUMENT 

This lawsuit presents a single claim: that the EESA, as applied to the Treasury 

Department’s purchase of AIG preferred stock, violates the First Amendment’s prohibition 

against the establishment of religion. See Am. Compl. ¶ 1. To prevail, plaintiff must present 

evidence sufficient to show either that the EESA was enacted “with the ostensible and 

predominant purpose of advancing religion,” McCreary County v. ACLU, 545 U.S. 844, 860 

(2005), or that the EESA, as applied to the Treasury Department’s purchase of AIG preferred 

stock, has had “the primary effect of advancing religion.” Am. Atheists, Inc. v. Detroit 

Downtown Dev. Auth., 567 F.3d 278, 288-89 (6th Cir. 2009) (citations omitted).4 When 

determining the purpose of a statute or the effect of its implementation, the Court must view the 

evidence from “the perspective of an objective observer.” ACLU v. Grayson County, Ky., 591 

 

4 Courts also consider whether there is an “excessive entanglement” between government and religion. 

The Supreme Court recently “reformulated the excessive entanglement prong of the test to include it in 

the inquiry into the second prong – the primary effect test.” Johnson v. Econ. Dev. Corp. of County of 

Oakland, 241 F.3d 501, 512 (6th Cir. 2001) (citing Agostini v. Felton, 521 U.S. 203, 234 (1997)).

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12 

F.3d 837, 848, 854 (6th Cir. 2010) (citing McCreary County, 545 U.S. at 862). “The ‘objective 

observer’ is credited with knowledge of ‘readily discoverable fact,’ including ‘the traditional 

external signs that show up in the text, legislative history, and implementation of the statute or 

comparable official act.’” Id. (quoting McCreary County, 545 U.S. at 862). As shown below, no 

objective observer could conclude that the EESA, as applied to the Treasury Department’s 

investment in AIG, had either the predominant purpose or primary effect of advancing the 

Islamic religion. As a result, defendants’ motion for summary judgment should be granted. 

I. The Government Acted With A Valid Secular Purpose In Enacting And 

 Implementing the EESA 

The undisputed evidence demonstrates that Congress enacted the EESA for the valid 

secular purpose of addressing the financial panic confronting the country in the Fall of 2008. 

Indeed, Congress articulated its purpose in the EESA itself, stating that the legislation was 

intended “to immediately provide authority and facilities that the Secretary of the Treasury can 

use to restore liquidity and stability to the financial system of the United States.” 12 U.S.C. § 

5201(1). Thus, as the Court has already concluded, “Congress enacted the EESA in response to 

what the parties portray as a monumental economic crisis for the sole purpose of restoring 

stability to financial institutions.” Murray v. Geithner, 624 F. Supp. 2d 667, 676 (E.D. Mich. 

2009) (emphasis added). 

 Likewise, any reasonable observer must conclude, based on a review of readily available 

fact, that the Treasury Department purchased AIG preferred stock for a secular purpose. As 

former Secretary Paulson recently explained, the initial investment in AIG, in November 2008, 

was motivated by the concern that “without an equity infusion” AIG would have failed, which 

“would have collapsed our financial system and devastated millions of Americans.” Paulson 

1.27.2010, at 1-2 (Ex. B to Coleman Decl.); see also Geithner Prepared Remarks 1.27.10, at 8 

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13 

(Ex. A to Coleman Decl.); Troubled Asset Determination 11.9.08 (Ex. B to Millstein Decl.); 

Henry M. Paulson, On the Brink: Inside the Race to Stop the Collapse of the Global Financial 

System, 376-94 (2010) (recounting decision to purchase AIG preferred shares pursuant to the 

TARP). Similarly, the March 2009 decision to purchase AIG’s Series F Preferred Shares was 

intended “to stabilize this systemically important company in a manner that best protects the U.S. 

taxpayer.” Millstein Decl. ¶ 13; see also Millstein Depo. at 45-46 (Ex. K to Coleman Decl.). By 

contrast, there is no evidence that the Treasury Department officials responsible for the 

investments were even aware that any of AIG’s subsidiaries marketed insurance products as 

Shariah-compliant. See, e.g., Millstein Decl. ¶ 28; Hsu Depo. at 37-39 (Ex. J to Coleman Decl.). 

Accordingly, no reasonable observer could conclude that Congress, in enacting the 

EESA, or the Treasury Department, in purchasing AIG preferred stock pursuant to the EESA, 

acted with the “ostensible and predominant purpose of advancing religion.” McCreary County, 

545 U.S. at 860. 

II. The Treasury Department’s Purchase of AIG Preferred Stock Has Not Had The 

 Primary Effect of Advancing the Islamic Religion 

A reasonable observer could not conclude that the Treasury Department’s purchase of 

AIG preferred stock pursuant to the EESA has had the “primary effect of advancing religion.” 

Am. Atheists, 567 F.3d at 291 (citing Agostini, 521 U.S. at 234-35; Bowen v. Kendrick, 487 U.S. 

589, 609 (1988)). The Supreme Court has identified three criteria for evaluating whether a 

government aid program impermissibly advances religion: (1) whether it results in religious 

indoctrination that could be attributed to the government; (2) whether it defines its recipients by 

reference to religion; and (3) whether it creates an excessive entanglement with religion. See 

Mitchell v. Helms, 530 U.S. 791, 808 (2000) (plurality opinion) (citing Agostini, 521 U.S. at 

234); id. at 845 (O’Connor, J., concurring) (same); see also Am. Atheists, 567 F.3d at 291-94. 

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14 

The EESA, as applied to the Treasury Department’s purchase of AIG preferred stock, has none 

of these characteristics. 

A. The Treasury Department’s Purchase of AIG Preferred Stock Has Not Led to 

Religious Indoctrination that Could Reasonably Be Attributed to the Government

 There are three independent reasons why a reasonable observer could not conclude that 

the Treasury Department’s investment in AIG has led to religious indoctrination that could be 

attributed to the Treasury Department. First, no EESA funds have been used directly or 

indirectly to support the sale of Shariah-compliant products. Second, even assuming arguendo

that the sale of Shariah-compliant products has benefitted from AIG’s receipt of EESA funds, 

this benefit would have resulted from the private choice of AIG employees, and could not be 

attributed to Treasury Department officials. Third, the sale of Shariah-compliant products does 

not constitute religious indoctrination. 

First, Plaintiff cannot “prove that the aid in question actually is, or has been, used for 

religious purposes,” Mitchell, 530 U.S. at 857 (O’Connor, J., concurring),5

 or that EESA funds 

are “flowing to [financial institutions] that can be considered ‘pervasively sectarian’ religious 

institutions.” Bowen, 487 U.S. at 621.6 Pursuant to the EESA, the Treasury Department has 

purchased preferred stock from AIG. Gender Decl. ¶¶ 10-11; Millstein Decl. ¶¶ 10, 16. 

 And, although a handful of AIG’s approximately 290 subsidiaries do market Shariahcompliant products, that fact does not render AIG a sectarian institution. 

It is a fundamental principle of corporate law that, so long as corporate 

 

5

 A de minimis use of EESA funds for religious purposes would not implicate the Establishment Clause. 

Mitchell, 530 U.S. at 820-24 (plurality opinion); id. at 860-66 (O’Connor, J., concurring). 

6 An institution is considered pervasively sectarian if it “is so ‘subsumed in the religious mission’ that it is 

impossible to separate the religious from the secular and to channel aid only to the latter.” Am. Atheists, 

567 F.3d at 295 (quoting Hunt v. McNair, 413 U.S. 734, 743 (1973)). 

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15 

formalities are observed, the actions of corporate subsidiaries are not imputed to parent 

corporations. See United States v. Bestfoods, 524 U.S. 51, 61 (1998) (citations omitted). 

Accordingly, plaintiff’s allegation that “AIG engages in Shariah-compliant financing,” Am. 

Compl. ¶ 71, has no support in fact. 

Furthermore, there is no evidence that the proceeds from AIG’s sale of preferred stock to 

the Treasury Department were used to promote the sale of Shariah-compliant products by AIG’s 

subsidiaries. All of the $40 billion in proceeds from AIG’s sale of Series D Preferred Stock were 

used to pay down AIG’s indebtedness with the FRBNY. Millstein Decl. ¶ 10; Gender Decl. ¶ 

10. 

. As a result, plaintiff cannot show that any of the 

proceeds of the Secretary’s purchase of AIG preferred stock have been used—even indirectly—

“to fund ‘specifically religious activities in an otherwise substantially secular setting[,]’” Bowen, 

487 U.S. at 621 (quoting Hunt v. McNair, 413 U.S. 734, 743 (1993)), even assuming arguendo

that the sale of Shariah-compliant products is a “specifically religious activity” (which it is not, 

see infra). 

Indeed, although the fact is not material to plaintiff’s Establishment Clause claim,7

 it is 

worth noting that, since the Treasury Department’s investment, 

 

7

 Even if plaintiff were able to show that the use of EESA funds to pay down debt or for any other 

purpose allowed AIG to use funds from other sources to support the sale of Shariah-compliant products, 

such a showing would be legally irrelevant. As the Sixth Circuit recently explained, “[t]he Supreme 

Court has repeatedly rejected ‘the recurrent argument that all aid is forbidden because aid to one aspect of 

an institution frees it to spend its other resources on religious ends.” Am. Atheists, 567 F.3d at 296 

(quoting Hunt, 413 U.S. at 743); see also Mitchell, 530 U.S. at 825 (plurality opinion). 

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16 

 

 

8

 

Second, even assuming that funds provided to AIG by the Treasury Department pursuant 

to the EESA had, after a series of intermediate transactions, been used by AIG’s subsidiaries to 

support the sale of Shariah-compliant insurance products, such support could not be attributed to 

the Treasury Department. As noted, the Treasury Department has not provided funds directly to 

any AIG entity that markets Shariah-compliant products. Lee Decl. ¶ 5; Millstein Decl. ¶¶ 10, 

17. It is also undisputed that the Treasury Department cannot direct AIG to use the funds 

provided by the Commitment for any specific purpose. Millstein Decl. ¶ 17. Finally, it is also 

undisputed that Treasury Department officials have not had any communication with employees 

of AIG or its subsidiaries about Shariah-compliant products. Millstein Decl. ¶ 28; Power Decl. 

¶¶ 9-10; Rahdi Decl. ¶ 10; Zain Decl. ¶ 14; Kamdani Decl. ¶ 14; Homsi Decl. ¶ 11. 

 Indeed, no reasonable observer could conclude that Treasury Department officials even 

considered the possibility that funds provided to AIG would ultimately be used to promote the 

 

8

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17 

sale of Shariah-compliant products. The initial $40 billion was used exclusively to pay down 

debt to the FRBNY, per the terms of the Series D Securities Purchase Agreement. Millstein ¶ 

10. 

 The undisputed evidence demonstrates that Treasury 

officials were not even aware that AIG subsidiaries sold Shariah-compliant products until they 

learned of this lawsuit, Hsu Depo. at 37-39; Millstein Decl. ¶ 28, which is not surprising given 

these products’ de minimis contribution to AIG’s consolidated revenue.9

 Accordingly, even if plaintiff could show that EESA funds were passed through to a 

subsidiary that markets Shariah-compliant insurance products and that the subsidiary actually 

used the funds to promote the sale of such products (he cannot), the link between such promotion 

and the Treasury Department would be “broken by the independent and private choice of 

recipients.” Locke v. Davey, 540 U.S. 712, 719 (2004) (citing cases). As a result, any 

“incidental advancement of a religious mission, or . . . perceived endorsement of a religious 

message” resulting from the sale of Shariah-compliant products would be “reasonably 

attributable to [employees of AIG and its subsidiaries], not to the government, whose role ends 

with the disbursement of [the purchase price].” Zelman v. Simmons-Harris, 536 U.S. 639, 652 

(2002). Accordingly, for this reason alone, the sale of such products could not be attributed to 

the Treasury Department. 

Third, although the Court need not reach the issue for either of the two independent 

reasons set forth above, the Court could also grant defendants’ motion because the sale of 

Shariah-compliant products does not “inculcate religion.” Mitchell, 530 U.S. at 847 (O’Connor, 

 

9

 Compare

with Coleman Decl. ¶ 8 (AIG’s FY 2009 results 

included total premiums of $64.7 billion and total revenue of $96.0 billion). 

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18 

J., concurring). Shariah-compliant products serve the same purposes as standard insurance 

products, but are simply structured differently. For example, 

 

Nobody is compelled to purchase these products or prevented from purchasing standard 

insurance policies, and even those individuals who do purchase the products are not “coerce[d] 

. . . to support or participate in religion or its exercise.” Lee v. Weisman, 505 U.S. 577, 587 

(1992). 

and are offered for an entirely secular purpose—to meet consumer 

demand. See, e.g., AIG Press Release 12.1.08 (Ex. D to Coleman Decl.). The secularlymotivated offer of a range of insurance products, including those that “coincide with the beliefs 

of certain religious” consumers, 10 is not constitutionally impermissible, just as it “would [not] be 

unconstitutional if . . . a government employer directly sent a portion of an employee’s paycheck 

to a religious institution designated by that employee pursuant to a neutral charitable program.” 

 

10 See Bowen, 487 U.S. at 604 n.8 (citing Harris v. McRae, 448 U.S. 297, 319-20 (1980) (law limiting use 

of federal funds for abortion does not violate Establishment Clause notwithstanding the law’s consistency 

with “the doctrines of the Roman Catholic Church concerning the sinfulness of abortion and the time at 

which life commences.”); McGowan v. Maryland, 366 U.S. 420, 442 (1961) (“the ‘Establishment’ Clause 

does not ban federal or state regulation of conduct whose reason or effect merely happens to coincide or 

harmonize with the tenets of some or all religions.”)).

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Mitchell, 530 U.S. at 819 n.8 (plurality opinion). In sum, even if the offer of Shariah-compliant 

insurance products could be attributed to the government, a reasonable observer would not 

conclude that the “government [is] appearing to take a position on questions of religious belief or 

. . . ‘making adherence to a religion relevant in any way to a person’s standing in the political 

community.’” County of Allegheny v. ACLU, 492 U.S. 573, 594 (1989) (citing Lynch v. 

Donnelly, 465 U.S. 668, 687 (1984) (O'Connor, J., concurring)). Accordingly, the Court may 

grant defendants’ motion for summary judgment on this basis as well. 

B. The TARP Does Not Define Its Recipients By Reference to Religion 

 The TARP is a broad based program that is entirely neutral as to religion, and which 

“allocates benefits in an evenhanded manner to a broad and diverse spectrum of beneficiaries.” 

Am. Atheists, 567 F.3d at 289 (citing Good News Club v. Milford Cent. Sch., 533 U.S. 98, 114 

(2001); Mitchell, 530 U.S. at 809-13 (plurality opinion); id. at 838 (O’Connor, J., concurring)). 

The EESA provides the Secretary broad authority to purchase “troubled assets” from any 

“financial institution.” 12 U.S.C. § 5211. The terms “troubled assets” and “financial institutions” 

are defined without reference to religion. Id. at § 5202. In exercising this authority, the EESA 

instructs the Secretary to consider several factors, none of which have religious content. Id. at § 

5213. Accordingly, the benefits of participation in the TARP are “allocated on the basis of 

neutral, secular criteria that neither favor nor disfavor religion.” Mitchell, 530 U.S. at 813 

(plurality opinion) (quoting Agostini, 521 U.S. at 231). 

Furthermore, the Secretary has not administered the TARP in a manner that defines 

recipients according to religious criteria. As of April 30, 2010, the Secretary has purchased or 

made commitments to purchase approximately $490 billion of troubled assets from over 700 

different financial institutions, including AIG. See Millstein Decl. ¶ 7. The criteria used to 

select TARP participants “are not religious in nature, and do not draw distinctions between 

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20 

financial institutions based on religious distinctions.” Id. at ¶ 8.11 As a result, neither the TARP 

nor any of the programs created under the TARP “employ[] skewed selection criteria that stack 

the deck in favor of groups that engage in religious indoctrination, encouraging potential 

recipients to take part in religious activity by rewarding them for doing so.” Am. Atheists, 567 

F.3d at 291 (citing Agostini, 521 U.S. at 231). 

C. The Treasury Department’s Purchase of AIG Preferred Stock Has Not Created An 

Excessive Entanglement Between Government and Religion 

Finally, the undisputed facts show that the Treasury Department’s purchase of preferred 

stock pursuant to the EESA has not “excessively entangle[d] the government in religious 

affairs.” Am. Atheists, 567 F.3d at 294 (citing Agostini, 521 U.S. at 232-33). 

 Accordingly, the 

Treasury Department’s investment in AIG involves “no inquiries into religious doctrine, . . . no 

delegation of state power to a religious body, . . . and no detailed monitoring and close 

administrative contact between secular and religious bodies.” Hernandez v. Comm’r of Internal 

Revenue, 490 U.S. 680, 696-97 (1989) (citations and internal quotations omitted). 

CONCLUSION 

 For the foregoing reasons, defendants respectfully request that the Court grant 

defendants’ motion for summary judgment. 

 Respectfully submitted, 

 TONY WEST 

 Assistant Attorney General 

 

11 See generally www.financialstability.gov/roadtostability/programs.htm (last accessed May 27, 2010) 

(briefly describing programs created under the TARP and providing links for further information); see 

also Third Tranche Report to Congress 12.2.08 (Ex. L to Coleman Decl.) (setting forth criteria for 

participation in the Systemically Significant Failing Institutions Program).

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21 

 BARBARA L. MCQUADE 

 United States Attorney 

 JOHN R. GRIFFITHS 

 Assistant Director, Federal Programs Branch 

 

 /s/ John R. Coleman 

JOHN R. COLEMAN 

JULIE STRAUS 

 Trial Attorneys, U.S. Department of Justice 

 Civil Division, Federal Programs Branch 

 20 Massachusetts Ave., N.W., Room 6118 

 Washington, D.C. 20530 

 Telephone: (202) 514-4505 

 Facsimile: (202) 616-8460 

 Email: John.Coleman3@usdoj.gov

 

DATED: June 7, 2010 

 

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CERTIFICATE OF SERVICE 

 I hereby certify that on June 7, 2010, I electronically filed the foregoing paper with the 

Clerk of the Court using the ECF system, which will send notification of such filing to the 

following: Robert J. Muise, David Yerushalmi. I further certify that I provided unredacted 

copies of Defendants’ Motion for Summary Judgment and any exhibits filed under seal to Robert 

J. Muise and David Yerushalmi by electronic mail. 

 /s/ John R. Coleman 

 John R. Coleman 

 Trial Attorney, U.S. Department of Justice 

 Civil Division, Federal Programs Branch 

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