(Bloomberg) -- Hank Greenberg won his fight to hold the U.S.responsible for the bitter pill it forced down the throat ofAmerican International Group Inc. shareholders. But that’s aboutit.

The judge who called the terms of the $85 billion bailoutillegally onerous also ruled that without it investors would havegotten nothing. As a result, he awarded Greenberg no money.

The split-decision sets up the possibility that both sides willappeal, and that a battle over a key element of the governmentresponse to the 2008 financial crisis will continue for months oryears to come.

“In the end, the Achilles’ heel of Starr’s case is that, if notfor the government’s intervention, AIG would have filedfor bankruptcy,” U.S. Court of Claims Judge Thomas Wheeler said.“AIG’s shareholders would most likely have lost 100 percent oftheir stock value.”

What began as a long-shot case by Greenberg’s StarrInternational Co. gained credibility over years of failedgovernment attempts to dismiss it. Last year’s trial was ashowpiece for Starr’s lawyer David Boies, who grilled Ben Bernanke,Hank Paulson and Timothy Geithner as Wheeler repeatedly ruled inGreenberg’s favor, telegraphing his ruling Monday.

Greenberg had sought as much as $40 billion in damages forshareholders. Though the absence of an award may temper thedramatic rebuke of the government handling of the bailout, theruling may still limit the Federal Reserve’s ability to deal withthe next crisis.

Splitting Baby

“The judge found a way of splitting the baby,” said JoshStirling, an analyst with Sanford C. Bernstein.

AIG rose more than 2 percent to $63.32 at 1:32 p.m. in NewYork stock market trading.

Starr sued the U.S. in November 2011, claiming the governmentbroke the law by insisting on 80 percent of AIG stock andimposing a 14 percent interest rate on the loan.

Wheeler agreed, saying that while the Federal Reserve hadauthority to make an emergency loan to AIG, it didn’t have theauthority to take shares in exchange for it.

The government countered the demands were justified since theloan was high-risk. As evidence, government lawyers cited similarterms in a private rescue that fell through over doubts about AIG’sability to repay.

Though the bailout ballooned to $182billion, AIG returned to the black and repaid theassistance in 2012, leaving the government with a $22.7 billionprofit.

Nicole Navas, a spokeswoman for the Justice Department, andEdward Evans, a spokesman for Boies, declined to immediatelycomment on the ruling.

Wheeler, who presided over the trial without a jury, was oftenskeptical of the government’s arguments against Starr, AIG’slargest shareholder at the time of the bailout. In a preliminaryruling in 2012, he wrote that he didn’t accept the government’sposition that the Fed’s emergency powers allowed it to demandstock.

Starr’s Requests

He granted Starr requests to present evidence of previouslyconfidential correspondence showing that U.S. regulators alsodoubted their authority to demand stock as part of the bailout.

Bernanke, the former Federal Reserve chairman, and formerTreasury Secretaries Paulson and Geithner all testified that thebailout was an extraordinary measure to avoid a collapse that wouldhave been disastrous for the economy.

Geithner headed the New York Fed at the time of the bailout.

Greenberg “had a compelling argument that things happened soquickly that the shareholders didn’t really get an opportunity toevaluate the rescue,” Cliff Gallant, an analyst at Nomura HoldingsInc., said in a phone interview. “I assume there will still be lotsof legal wrangling.”

The case is Starr International Co. v. U.S., 11-cv-779, U.S.Court of Federal Claims (Washington).

--With assistance from Tom Schoenberg in Washington, Dan Krautand Sonali Basak in New York and Noah Buhayar in Seattle.

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