US insurance giant AIG has agreed to pay 725 million dollars to settle allegations of market fraud brought by three Ohio pension funds, the state’s attorney general said Friday.
“The settlement resolves allegations of AIG’s wide-ranging fraud from October 1999 to April 2005 involving anti-competitive market division, accounting violations and stock price manipulation,” the office of attorney general Richard Cordray said in a statement.
Cordray declared the class-action settlement a victory for the “teachers, firefighters, police officers, and public employees,” who were “harmed by AIG’s misconduct.”
The company was accused of accounting fraud designed to boost AIG’s reserves to cover claims, a bid-rigging scheme with insurance brokers and executives ordering traders to inflate AIG’s stock price.
Cordray said it was the 10th-largest securities class-action settlement in US history. It is the latest blow to the beleaguered firm, which needed nearly 70 billion dollars in government bailouts to stay afloat after the subprime mortgage crisis.
Earlier this week Harvey Golub resigned as chairman of the board, amid rumors about discord among top executives at the firm.
If the fine wins court approval it will mean AIG investors are entitled to slightly more than one billion dollars in compensation, including settlements with AIG partners General Re — owned by billionaire Warren Buffett — PricewaterhouseCoopers and former AIG chief executive Maurice “Hank” Greenberg, the statement said.
AIG will have to pay 175 million dollars of the settlement within 10 days of court approval. A further 550 million dollars must be paid from the proceeds of one or more stock offerings.
Shares in AIG fell 4.65 percent on Friday, amid a wider stock market sell-off. In after-hours trading they pared some of the losses.
It is the latest in a string of settlements agreed by the firm.
In 2008 AIG and four of its former senior executives agreed to pay 115 million dollars to settle fraud claims from the Teachers’ Retirement System of Louisiana.
In 2006 AIG agreed to pay 1.6 billion dollars to settle a probe into allegations that it used misleading accounting to inflate its results.
That settlement, reached between the insurance giant and New York state Attorney General Eliot Spitzer, the Securities and Exchange Commission and the New York State Insurance Department, was at the time one of the largest corporate penalties ever.
Washington, July 16, 2010 (AFP)
