AIG settles in $725m Ohio fraud lawsuit
INSURER American International Group (AIG) has been ordered to cough up $725m (£473.7m) in compensation to its Ohio pension fund shareholders, as part of a settlement of a long-running securities class action lawsuit against the firm.
AIG was accused by the pension funds and the Ohio attorney general’s office of anti-competitive market practices, including a large-scale accounting fraud that led to a $3.9bn restatement of the group’s financial position in 2005. The lawsuit, which was brought by the Ohio Public Employees Retirement System, the State Teachers Retirement System and the Ohio Police and Fire Pension Fund, sought damages for those investors purchasing AIG stock between October 1999 and April 2005.
It was presided over by Ohio’s crusading attorney general Richard Cordray, who has already secured billions of dollars in compensation for Ohio investors as part of a self-styled drive to “hold Wall Street to account”. Bank of America, Merrill Lynch, Fannie Mae and Freddie Mac have all been subjected to lawsuits on Cordray’s watch.
As part of the settlement, AIG will pay $725m to the shareholders, of which $175m is due on preliminary court approval of the settlement. AIG may fund the remaining $550m through one or more stock offerings.
The payout forms part of a $1bn overall settlement, under which former AIG chief executive Hank Greenberg, auditor PwC and General Reinsurance Corporation have all already agreed to compensate shareholders for varying amounts.
An AIG spokesman said the settlement would allow the firm to continue to “focus its efforts on paying back taxpayers” after it was bailed out by the US government in the crisis.