A federal court judge in Washington has cleared for trial claimsby former CEO Maurice “Hank” Greenberg that the federalgovernment's methodology in aiding a troubled AmericanInternational Group amounted to an attempt to “steal thebusiness.”

Greenberg re-filed his suit last July through StarrInternational, which owns approximately 13 percent of AIG.

But in his ruling, Court of Claims Judge Thomas WheelerWednesday dismissed all derivative claims filed on behalf ofAIG.

In January, AIG's board decided not to join the complaint, anddid so in such a way that AIG would not benefit even in the eventStarr/Greenberg won the lawsuit. AIG also asked that it bedismissed as a derivative plaintiff in a court filing in April.

In the lawsuit, which has been re-filed three times,Starr/Greenberg seek approximately $25 billion on behalf of the twoclasses of shareholders still involved in the complaint. The amountsought is the value of the 79.9 percent equity interest thegovernment took in Sept. 2008 as its price for providing federalassistance to a troubled AIG.

The suit also seeks an unspecified amount for the anti-dilutionrights taken from common shareholders in June 2009.

The suit argues that because AIG's assets exceeded itsliabilities at the time the company received assistance, thegovernment should have provided it with enough liquidity to meetthe demands of creditors—as it did for other troubled financialcompanies in 2007 and 2009—and not demanded control of 79.9 percentof its stock as the price for aid.

In his ruling, Wheeler ordered the government to file an answerto Starr's amended complaint on or before July 16, and added thathe will hold a conference with counsel July 9 to set a date fortrial.

He reiterated that he had originally denied the government'smotion to dismiss the case because “assuming the truth of Starr'sallegations, Starr may maintain a direct claim for the taking ofits equity and voting interests, because 'the government extractedfrom the public shareholders, and redistributed to itself, aportion of the economic value and voting power embodied in theminority interest.'”

The judge also took issue with some circumstances surroundingAIG's decision not to join the complaint. Specifically, headdressed comments from an outside counsel for AIG predicting howthe court would rule in the case.

Wheeler said that Paul Curnin, co-chairman of the litigationdepartment of Simpson Thacher & Bartlett LLP “reported the viewof the multiple advising attorneys that Starr's claims 'had a lowlikelihood of success', which he quantified to be around 20percent, with a 5 percent margin of error.”

He questioned how “anyone could have made a precise assessmentof this fact-dependent case without knowing what all of theevidence ultimately will show.”

Wheeler also addressed an allegation that a Treasury official“made threatening statements to AIG's board members when the boardwas fulfilling its legal obligation to consider entry into thislawsuit.”

Wheeler said the “court is troubled that counsel for theTreasury Department (the defendant agency), made thestatements.”

He further cited the “media frenzy” in reaction to theproposition that AIG would join this lawsuit against thegovernment.

He said media reports “contain inflammatory quotations from anumber of public figures and elected officials who apparentlylacked any understanding that AIG was required to consider entryinto the lawsuit under the demand process of Delaware law.

“It is unfortunate that AIG's board members had to deal withthis misplaced pressure and public outcry,” Wheeler said.

Reacting to Wheeler's ruling, David Boies, lawyer for Starr andGreenberg at Schiller & Flexner LLP, says, “We are pleased thatthe Court of Federal Claims has denied the motion of the U.S. andpermitted Starr International to pursue the claims of two classesof AIG shareholders for tens of billions of dollars that thegovernment took without just compensation and/or illegally exactedin 2008 and 2009.”

Responding for the government, Timothy Massad, assistantTreasury Secretary for the Office of Financial Stability, says,“While we are disappointed that the court did not dismiss theentire case—as the New York court did with the related lawsuit lastNovember—we are pleased that the court dismissed much of it.

“We believe that the remaining claims against the governmenthave no merit, and will continue to defend the casevigorously.”