FEBRUARY 03, 2012
Judge approves $725M settlement in AIG fraud case
BY JOHN O'BRIEN
|Cordray|NEW YORK (Legal Newsline) - A federal judge has approved a $725 million settlement between plaintiffs and American International Group.
U.S. District Judge Deborah Batts, of the Southern District of New York, accepted the settlement, which resolves allegations of accounting fraud, collusion and stock price manipulation from Oct. 28, 1999-April 1, 2005. Three Ohio public pension funds served as lead plaintiffs.
The settlement was originally reached in July 2010 when Richard Cordray was Ohio's attorney general. Via recess appointment, he is now the head of a new federal consumer protection agency.
Mike DeWine defeated Cordray in the 2010 election for Ohio attorney general.
"Ohioans and Ohio retirees' retirement accounts took a hit when AIG was accused of widespread misconduct. I'm glad these hard-working citizens, including Ohio's first responders and teachers, will finally get some financial recovery," DeWine said. "This case sends a strong message to corporate wrongdoers."
The case involved three types of claims, including accounting fraud.
The lawsuit pointed to a $500 million no-risk allegedly fraudulent reinsurance transaction that AIG entered into with General Reinsurance Corp. to "artificially boost AIG's reported claims reserves." One AIG executive and four Gen Re executives were found guilty of securities fraud in relation to the transaction.
The plaintiffs said AIG also paid tens of millions of dollars in undisclosed contingent commissions to insurance brokers and participated in a "bid-rigging scheme" with insurance brokers and certain insurance companies.
AIG also engaged in straightforward stock price manipulation, in which company executives ordered company traders to inflate AIG stock price, the plaintiffs said.
Other settlements resulting from the alleged scheme include $72 million from General Reinsurance, $97.5 from PricewaterhouseCoopers and $115 million with four AIG executives and related corporate entities. Those settlements have not been finalized by a court yet.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.