The U.S. Supreme Court on Monday rejected an appeal by former American International Group Inc Chief Executive Maurice “Hank” Greenberg, who accused the Federal Reserve Bank of New York of unlawfully bailing out the insurer at the height of the 2008 financial crisis.
The court left intact a 2nd U.S. Circuit Court of Appeals decision from January that said the New York Fed’s authority to address major threats to the economy justified the dismissal of Delaware breach of fiduciary duty claims by Greenberg’s Starr International Co, which once held a 12 percent AIG stake.
AIG is based in New York but incorporated in Delaware and was once the world’s largest insurer by market value.
Starr had accused the New York Fed of engineering a “backdoor” bailout for Goldman Sachs Group Inc and other Wall Street banks at the expense of AIG shareholders by forcing the insurer to unwind bets on mortgage debt through hundreds of billions of dollars of credit default swaps.
There is a related case pending before the U.S. Court of Federal Claims in Washington, which handles lawsuits seeking money from the government. There, Greenberg and Starr called the AIG bailout an illegal “taking” that violated the Fifth Amendment of the U.S. Constitution.
The case is Starr International Co v. Federal Reserve Bank of New York, U.S. Supreme Court, No. 13-316. (Reporting by Lawrence Hurley; additional reporting by Jonathan Stempel; Editing by Will Dunham)