Delaware Court Approves $115M Settlement with Former AIG Execs

October 22, 2008

The Delaware Chancery Court has given preliminary approval to a $115 million settlement in a shareholder derivative action brought by the Teachers’ Retirement System of Louisiana against four former AIG executives and C.V. Starr & Co.

The defendants from AIG, including former CEO Maurice “Hank” Greenberg, former CFO Howard Smith, former director Edward E. Matthews and former Senior Vice Chairman Thomas Tizzio, admitted no wrongdoing as part of the settlement.

Of the $115 million settlement, Greenberg, Smith and Matthews and their directors and officers liability insurers will pay $85.5 million; $28.25 million will be paid by C.V. Starr & Co., Inc.; and Tizzio will pay $1.25 million. Greenberg is now chairman of C.V. Starr.

Attorneys’ fees not to exceed 22.5 percent of the settlement fund and reimbursement of out of pocket expenses incurred by plaintiff’s counsel not to exceed $2.25 million are to be paid from the settlement fund.

The Louisiana pension fund lawsuit, which was filed in 2002 before Greenberg left AIG amid questions over corporate accounting methods, alleged that the AIG executives engaged in self-dealing in certain transactions with C.V. Starr.

The teachers’ fund alleged that the former directors and executive officers of AIG breached their fiduciary duties to the company and to its shareholders, and that defendant C.V. Starr & Co., Inc. aided and abetted those alleged breaches of fiduciary duty.

Defendants continue to deny all allegations of wrongdoing and liability.

A final hearing on the settlement will be held on Dec. 17 in Delaware.

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