Calling the accusations “worthy of an Oliver Stone movie,” a federal district court judge in New York today dismissed a lawsuit brought by former American International Group chief executive Maurice “Hank” Greenberg against the Federal Reserve Board.
Greenberg and his company, Starr International, had charged that the Fed acted against the interests of AIG and its shareholders when it bailed AIG out starting in September 2008.
The court said arguments by Greenberg and Starr International are “not plausible,” dismissing, amongst other allegations, that AIG was forced by the N.Y. Fed in Sept. 2008 to pay excessive amounts to its counterparties to satisfy its obligations under credit default swap contracts. Starr claimed in the suit that that transaction served as a “backdoor bailout” by the N.Y. Fed of these counterparties.
A spokesman for the N.Y. Fed says the agency would have no comment. A spokesman for Starr International referred all calls to Greenberg’s lawyers at Boies, Schiller and Flexner LLP, New York, who did not respond to requests for comment.
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The amended suit was filed November 2011.
Still remaining is a $25 billion lawsuit in the federal Court of Claims in Washington accusing the U.S. government of engineering an unconstitutional bailout of the insurer. In a preliminary ruling, a federal judge has allowed that suit to proceed.
Greenberg is a major AIG shareholder, and Starr is the original company from which AIG was created. Starr International held a 12 percent stake in AIG before a court settlement allowed it to again become independent.
“Federal Reserve Bank of New York’s motion to dismiss the amended complaint is granted in its entirety,” said Judge Paul A. Engelmayer in a decision filed today in the Federal Court for the Southern District of New York.
“All of Starr’s claims are dismissed with prejudice, with the exception of Starr’s takings claim, which was withdrawn, and which is therefore dismissed without prejudice,” Engelmayer ordered.
At the same time, the judge characterized the suit in colorful terms.
“Starr’s amended complaint paints a portrait of government treachery worthy of an Oliver Stone movie,” Engelmayer said.