Ex-A.I.G. Chief Wins Bailout Suit, but Gets No Damages

WASHINGTON — Maurice R. Greenberg, the former chief executive of the American International Group, prevailed in his lawsuit against the United States government on Monday, but a federal judge declined to award any damages.

The lawsuit, brought by Mr. Greenberg on behalf of himself and other A.I.G. shareholders, contended that the Federal Reserve overstepped its bounds when it bailed out the giant insurer in 2008, taking 79.9 percent of the company’s equity in the process. They argued that the Fed did not have the legal right to take the equity and effectively become its majority owner as a condition for the bailout.

Judge Thomas C. Wheeler of the United States Court of Federal Claims sided with Mr. Greenberg, who is still a large A.I.G. shareholder through his company Starr International. But at the same time, the judge ruled that Mr. Greenberg could not show that the shareholders were damaged by the seizure of the equity and therefore awarded no monetary judgment. Mr. Greenberg had been seeking nearly $40 billion in compensation.

Judge Wheeler wrote that the Fed’s action “constituted an illegal exaction under the Fifth Amendment.”

“The Board of Governors and the Federal Reserve Banks possessed the authority in a time of crisis to make emergency loans to distressed entities such as A.I.G., but they did not have the legal right to become the owner of A.I.G.,” he wrote in his decision. “There is no law permitting the Federal Reserve to take over a company and run its business in the commercial world as consideration for a loan.”

The judge’s ruling also criticized the government for “unduly harsh treatment” of A.I.G. compared with other financial institutions that were bailed out during the financial crisis.

However, when it came to assessing damages, Judge Wheeler ruled that he “must examine what would have happened to A.I.G. if the government had not intervened.”

“The inescapable conclusion is that A.I.G. would have filed for bankruptcy,” he wrote. “In that event, the value of the shareholders common stock would have been zero.”

Consequently, even though the government acted illegally, the shareholders, he wrote, were not entitled to damages.

The lawsuit went to trial last fall, and the architects of the bailout like Timothy F. Geithner, Ben Bernanke and Henry M. Paulson Jr. appeared as witnesses.

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