AIG Settles Security Case with Ohio
Written by Marlo .
For Buckeyes, the win certainly is not as exciting as the one that will occur on November 27, 2010 in Columbus, but it is certainly up there.
The Ohio Attorney General’s Office announced that a settlement has been reached with insurer AIG in a class-action case involving three large public pension funds. The total settlement (including some ancillary cases and matters) is $1.0095 billion dollars. A significant part of that settlement is to be paid by an AIG stock offering, so it remains to be seen if the settlement amount can be paid.
According to Attorney General Richard Cordray the class-action lawsuit alleged:
- AIG engaged in accounting fraud, culminating in a $3.9 billion restatement in May 2005 that included numerous different types of transactions, including allegations relating to a $500 million no-risk fraudulent reinsurance transaction that AIG entered into with General Reinsurance Corp. in order 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 that transaction.
- AIG 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 in order to divide the market for certain types of insurance.
- AIG engaged in straightforward stock price manipulation, in which company executives ordered company traders to inflate AIG stock price.
There were three pensions involved: the Ohio Public Employees Retirement System (OPERS), the State Teachers Retirement System of Ohio and the Ohio Police and Fire Pension Fund. A reminder to all of us here in Ohio that games on Wall Street directly affect our teachers, public servants, cops and firefighters. An issue that will be big in our governor’s race this year where the Republican candidate is a former Lehman Brothers Managing Executive in Columbus, Ohio, who made over $580,000 in 2008, while decrying the fact his AIG stock had fallen in value.
Keeping things in perspective, the insurer made $1.5 billion in net income in the first quarter of 2010 which begs the question why the State is giving AIG time to raise the settlement funds in another stock offering.