A federal judge in Manhattan has dismissed a $25 billion lawsuit filed by Starr International, an insurance company run by former American International Group CEO Maurice "Hank" Greenberg, against the Federal Reserve Bank of New York over its 2008 bailout of AIG, the New York Law Journal reported today. U.S. District Judge Paul Engelmayer yesterday rejected Starr's arguments that the bailout was an illegal takeover of multinational insurance company AIG and a "backdoor bailout" for other financial firms that did business with it. The lawsuit, Starr International v. Federal Reserve, 1:11-cv-08422, was filed last November on behalf of AIG's shareholders. Starr, which owned about 12 percent of AIG, alleged that the Federal Reserve effectively took control of AIG and then breached its fiduciary duty to shareholders under Delaware law by taking a two-thirds stake in residual profits from AIG's credit default swaps and forcing AIG to pay its counter-parties in full even when they offered concessions, among other conditions.
