Ohio Reaches $115M Settlement with AIG Ex-CEO Greenberg, Others

August 14, 2009

Ohio Attorney General Richard Cordray has announced an agreement in principle to settle claims against former American International Group (AIG) CEO Maurice R. “Hank” Greenberg and other AIG executives (Howard I. Smith, Christian M. Milton and Michael J. Castelli) and related corporate entities (C.V. Starr & Co., Inc. and Starr International Co., Inc.) for $115 million.

“AIG cannot be permitted to defraud investors and other companies who play by the rules. This agreement in principle will help compensate investors – including Ohio pension funds – who were harmed by AIG’s misconduct,” Cordray said.

The Attorney General’s case against AIG and its executives involve allegations of anti-competitive practices, such as market division through the use of undisclosed contingent commissions and bid-rigging, as well as allegations of a massive accounting fraud that led to a $3.9 billion restatement of AIG’s publicly available financial and regulatory filings.

The Ohio settlement came just days after Greenberg agreed to settle accounting charges with the Securities and Exchange Commission for $15 million.

Attorney General Cordray is litigating the case on behalf of three named plaintiffs, the Ohio Public Employees Retirement System, State Teachers Retirement System of Ohio and Ohio Police and Fire Pension Fund (collectively, the “Ohio Funds”), and seeks damages for investors who purchased AIG securities between Oct. 28, 1999 and April 1, 2005. The Ohio Funds have a fiduciary responsibility to safeguard the pension investments of their members and retirees, and are empowered to vigorously pursue litigation when necessary to preserve these investments.

This is the third multimillion dollar agreement negotiated by the Ohio Funds in the AIG case. The Ohio Attorney General’s Office previously announced a $97.5 million settlement with PricewaterhouseCoopersLLP and a $72 million settlement with General Reinsurance Corp.

The Attorney General noted that he will now focus on preparing the case for trial against the primary defendant, AIG.

“My office has negotiated agreements totaling $284.5 million from secondary defendants in this case. Yet AIG itself has so far refused to do right by investors who were wronged. This is completely unacceptable in light of AIG’s request to receive hundreds of millions of dollars in bonus compensation, underwritten by taxpayers due to a federal bailout caused by AIG’s poor business decisions and the financial crises. Such misconduct simply underscores why my office will continue to hold Wall Street accountable for its wrongs,” Cordray said.

The agreement in principle will only be executed upon the satisfaction of several contingencies, including approval by the boards of the Ohio Funds at their August board meetings.

Source: Ohio Attorney General’s Office, www.ohioattorneygeneral.gov

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