American International Group Inc. has settled a $60 million fraud suit brought by a group of investment funds that objected to a $725 million class action settlement over an alleged market division scheme. U.S. District Judge Deborah Batts was told that both parties had reached a settlement in principle. The plaintiffs — investment funds whose investors include state, municipal and corporate pension and retirement funds; educational, research and charitable endowments; and other institutional and individual investors — sued AIG in October 2013, accusing the insurance giant of disseminated false and misleading statements concerning its financial results and operations and manipulated the stock market during the period in which they purchased AIG stock.
AIG’s $725 million settlement was finalized in 2012 which, along with $97.5 million paid by PricewaterhouseCoopers LLP, AIG’s audit firm, and $115 million paid by former AIG chief Maurice “Hank” Greenberg and other former executives, was one of the largest settlements in U.S. history. The complaint objecting to the settlement alleged that in October 2004, then-New York Attorney General Eliot Spitzer implicated AIG in a scheme to pay insurance brokers improper “contingent commissions” that resulted in unsuspecting clients being steered by the brokers to purchase AIG insurance policies at inflated prices.
In addition, the complaint alleged a second scheme involving insurance accounting frauds that were fully revealed on May 31, 2005, when AIG filed its 2004 Form 10-K, restating years of earnings and resulting in the company slashing its net income from 2000 through 2004 by $3.9 billion, or 10 percent, and reducing the value of its shareholders’ equity by $2.26 billion. The plaintiffs are represented by Richard A. Bodnar, Thomas E. Redburn, Lawrence M. Rolnick, and Sheila A. Sadighi of Lowenstein Sandler LLP. It appears they have done a good job in this matter.
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