Major shareholders in US insurer AIG declared Tuesday they will appeal a court decision not to pay them damages for the state takeover of the firm during the 2008 financial crisis.
On Monday, the Washington Court of Claims ruled that the Federal Reserve and Treasury's dramatic nationalization of the group had indeed been illegal, as the shareholders had argued.
But the judge also decided that, as AIG would have collapsed if the state had not intervened, the plaintiff's stakes would have in any case been worthless -- and awarded no compensation.
Swiss group Starr International, which represents former AIG shareholders including its founder Hank Greenberg, said that it would appeal this part of the decision.
"Plaintiffs will appeal the ruling that there is no remedy for the government's illegal conduct, and ask the court of appeals to confirm that the government is not entitled to keep billions of dollars of citizen's money in its pockets," it said.
Separately, in another potential twist in the case, a Department of Justice official told AFP that the government was reviewing the case and had not ruled out appealing the ruling it had acted illegally.
Once the world's largest insurer, AIG was on the verge of collapse under tens of billions of dollars of souring, unhedged derivatives contracts in September 2008 when it sought liquidity from the New York Fed.
On the same climactic weekend that Washington allowed investment banking giant Lehmann Brothers to fail, the government agreed to lend AIG $85 billion in exchange for a 79.9 percent controlling stake.
The decision-makers of the time -- Fed chair Ben Bernanke, New York Fed governor Timothy Geithner and Treasury secretary Henry Paulson -- argued at trial that without their actions the US banking sector would have imploded.
They also argued that the AIG board agreed to the deal as a way to save the company, but Greenberg's firm alleged in its lawsuit that the takeover was an illegal nationalization.
Judge Thomas Wheeler agreed, ruling that: "A Federal Reserve Bank has no right to control and run a company to whom it has made a sizable loan."
Starr International welcomed this decision, but protested the ruling not to force the state to pay billions of dollars in damages to shareholders whose stakes were taken.
In Tuesday's statement, the firm argued that as the US government had eventually sold its stake in the rescued company it had made an improper profit of $23 billion.
The Fed insists its actions were both legal and necessary to protect the jobs and investments of millions of Americans from the potential collapse of the financial sector.