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Former AIG head Hank Greenberg testifies on Capitol Hill in 2009 (AP Photo/Gerald Herbert)

(Reuters) – A U.S. judge has ruled that former American International Group Inc Chief Executive Officer Hank Greenberg can pursue a case involving the insurer’s bailout, citing questions about the Federal Reserve Bank of New York’s authority to take equity in the company in exchange for a loan.

The U.S. Court of Federal Claims late Monday denied a government motion to reconsider a July ruling allowing Greenberg’s Starr International Co to pursue its case. The Court of Federal Claims case is separate from another Greenberg lawsuit pending in New York.

Starr once held a 12 percent stake in AIG. At one time the world’s largest insurer by market value, the company received a bailout on Sept. 16, 2008, as losses were skyrocketing from risky bets on mortgage debt through credit default swaps.

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