The US Supreme today put a nail in Hank Greenberg’s crusade to hold the Federal Reserve Bank of New York responsible for unlawfully bailing out the insurer while engineering a “backdoor” bailout for Goldman Sachs Group Inc (NYSE:GS), as he alleged. The high court also ruled against investors trying to recoup their lost money in the Bernie Madoff and Allen Stanford ponzi schemes.
Details of Hank Greenberg’s court case
In the Hank Greenberg case, the court left stand a a 2nd U.S. Circuit Court of Appeals decision from January that upheld the New York Fed’s authority to address major threats to the economy. Hank Greenberg’s Starr International Co., which once held a 12 percent stake in American International Group Inc (NYSE:AIG), claimed a breach of fiduciary duty by the New York Fed, who had engineered different bailout terms for Goldman Sachs.
Starr had accused the New York Fed of engineering a “backdoor” bailout for Goldman Sachs Group Inc (NYSE:GS) along with other Wall Street banks, which came at the expense of AIG shareholders such as Star by forcing the insurer to unwind bets on mortgage debt through hundreds of billions of dollars of unregulated credit default SWAPs. Those same SWAPs at the large banks remained intact, which created different market conditions that were less punishing to the banks, was Hank Greenberg’s essential argument.
Hank Greenberg: Starr International property taken by AIG
This isn’t Hank Greenberg’s only hope for redemption. A related case is pending before the U.S. Court of Federal Claims in Washington. The Federal Claims court handles lawsuits seeking money from the government and they will hear Starr’s claims that the American International Group Inc (NYSE:AIG) bailout illegally took its property in violation the Fifth Amendment of the U.S. Constitution.
The Supreme Court also today ruled against victims of two of the largest Ponzi schemes in history.
Court rejected a plea from the trustee liquidating
In the Madoff case, the court rejected a plea from the trustee liquidating Bernard L. Madoff Investment Securities LLC, to review the dismissal of claims against banks he accused of enabling Madoff’s fraud. JPMorgan was dropped from the case after reaching a $325 million settlement in January. The trustee had sued banks such as JPMorgan Chase & Co. (NYSE:JPM), HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA), UniCredit SpA (BIT:UCG) (OTCMKTS:UNCFF) (Italy) and UBS AG (NYSE:UBS) (Switzerland) over their involvement with Madoff.
In the Alan Stanford the court rejected a request by the court appointed receiver unwinding Stanford’s businesses, to challenge a ruling that blocked him from pursuing claims against Stanford employees on behalf of the receivership’s creditors.
The Supreme Court did not provide explanation for its decisions.