U.S. court: ex-AIG CEO has no right to challenge bailout

WASHINGTON — A federal appeals court has ruled that the former CEO of American International Group lacks the legal right to challenge the government’s bailout of the insurance giant in the heat of the financial crisis.

The ruling Tuesday by the U.S. Court of Appeals for the Federal Circuit overturned a lower-court decision and handed a victory to the government.

The next stop for the case may be the Supreme Court. David Boies, the attorney for ex-AIG chief Maurice Greenberg, said they will appeal the ruling. The unusual case raised the issue of limits on the government’s power in responding to financial catastrophe.

In a lawsuit filed by his company, Starr International, Greenberg had alleged the $85 billion bailout of the teetering AIG in September 2008 violated the Constitution’s Fifth Amendment by taking control of the company without “just compensation.”

The previous decision by a judge in the U.S. Court of Federal Claims validated Greenberg’s allegations in principle, though the judge rejected Greenberg’s demand for $40 billion in damages from the government for himself and other AIG shareholders.

Writing the new opinion for a three-judge panel of the appeals court, Chief Judge Sharon Prost said any claims against the government rightfully belong to AIG, not Starr.