A judge in Manhattan federal court dismissed Starr International’s $25 billion lawsuit against the New York Federal Reserve Bank. The ex-chief executive of American International Group, Inc. (NYSE:AIG), Maurice Greenberg, who now runs Starr International, had claimed that the Fed breached its fiduciary duties to shareholders in $182 billion bailout of American International Group, Inc. (NYSE:AIG) four years ago.

American International Group

Mr. Greenberg suffered a setback in the ongoing dispute. Starr International had alleged that the Federal Reserve Bank of New York forced AIG to cede valuable assets to Fed from American International Group, Inc. (NYSE:AIG) shareholders during the bailout without their consent or fair compensation. The lawsuit was filed in November 2011. Starr International is a shareholder in AIG.

Starr said that the New York Fed breached its duty to AIG shareholders by providing $85 billion loan at 14.5 percent, while it offered better terms to many banks in a “backdoor bailout.” It said that the bank induced, coerced and required AIG board and officers to violate their duties. But the U.S. District Judge Paul Engelmayer rejected Mr. Greenberg’s claims in a November 16 filing.

The American International Group, Inc. (NYSE:AIG) was on the verge of collapse during 2008 economic crisis when its bets on the housing market soured. The U.S. government poured in $182 billion from the beginning of 2008 to January 2011 to keep the troubled insurer afloat. In return, the government got ownership in the insurer, and now it has been selling its stake. Until September, the Fed was a majority stakeholder in AIG. Now the government owns only 16 percent in the insurer after it sold AIG shares worth $20.7 billion in September.

Mr. Greenberg worked for American International Group, Inc. (NYSE:AIG) from 1962 to 2005. He left the company amid investigations into the American International Group’s accounting practices. Maurice Greenberg has been extremely critical of the Fed’s handling of AIG bailout. Another lawsuit filed by Starr International is still pending in the U.S. Court of Federal Claims in Washington.