American International Group has sued two money management firms in an effort to recoup billions of dollars it claims were lost due to fraud. The insurer, 92 percent owned by the U.S. government, filed the suit against ICP Asset Management and Moore Capital in New York State Supreme Court. AIG contends it suffered huge losses by insuring mortgage securities that one of the financial firms created.
It was alleged in the lawsuit that the Defendants breached obligations to AIG related to the creation of complex collateralized debt obligations, or CDOs. AIG said it has suffered more than $350 million in damages from the Defendants’ misconduct, which included using inflated values on the mortgage bonds that were packaged into the CDOs. By inflating the values, AIG claims ICP created windfall profits for itself and increased its management fees. The lawsuit draws on allegations against ICP made by the Securities and Exchange Commission, which last year accused ICP of securities fraud. This was said by AIG to be the first of many more such suits to be filed against other companies.
Source: Insurance Journal
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