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Judge Certifies Shareholder Class In Suit Over AIG Statements

Source: Dow Jones

Posted on 23 Feb 2010

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A federal judge on Monday granted class certification for American International Group Inc. (AIG) shareholders, but threw out some claims in a lawsuit over alleged false statements regarding the insurer's financial results.

In an order Monday, U.S. District Judge Deborah Batts in Manhattan granted class certification for a group of AIG shareholders who purchased the company's stock between Oct. 28, 1999, and April 1, 2005.

However, the judge denied class certification for bondholders and so-called "in-and-out traders" who didn't hold the company's stock on Oct. 14, 2004; Oct. 15, 2004; March 17, 2005; or April 1, 2005.

She also threw out four claims related to AIG debt securities for lack of standing.

In 2005, AIG said it would restate more than four years of its earnings. It also said at the time, without naming Greenberg directly, that former executives at times were able to "circumvent internal controls over financial reporting."

In 2006, AIG agreed to pay more than $1.6 billion to settle accounting fraud allegations by the New York attorney general's office and the U.S. Securities & Exchange Commission.

"Although we continue to believe that no class should be certified, we are pleased that the court refused to certify any bondholder claims and significantly limited the equityholder claims," AIG said in a statement.

The insurer noted that it has already paid $800 million to a fund to compensate its investors as part of the SEC settlement.

"Any additional payments from AIG would not only come at the expense of taxpayers, but would greatly benefit the plaintiffs' lawyers who would undoubtedly seek millions in fees from any judgment or settlement," AIG said.

In August 2009, Maurice R. "Hank" Greenberg, AIG's former chief executive, and a group of former AIG executives agreed to pay $115 million to settle the allegations against them last year.

In February 2009, General Re Corp., a unit of Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB), agreed to pay $72 million to settle claims against it in the case. PricewaterhouseCoopers LLP, AIG's outside auditor, previously agreed to a $97.5 million settlement in the case.

The lead plaintiffs in the case are the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio and the Ohio Police & Fire Pension Fund.