AIG agrees to settle Ohio fraud case for $725 million
17 Jul 2010
Insurance major American International Group (AIG) has agreed to pay $725 million to settle a long-pending class action suit by three pension funds based in Ohio, in one of the biggest settlements in US history.
In their lawsuit, the pension funds have alleged that AIG had engaged in fraudulent practices that resulted in shareholder losses worth millions of dollars between 1999 and 2005.
The lawsuit, filed by Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio and the Ohio Police and Fire Pension Fund, alleged that AIG was involved in accounting fraud, bid-rigging and stock price manipulation during that period.
AIG, which was bailed out by the US government at the height of the banking crisis, is now 80 per cent owned by the US government.
AIG will have to make immediate payment of $175 million once the court gives its approval for the payment. However, for the remaining $550 million, the insurance major will have to raise further equity through fresh issue of shares.
This would take total AIG payout to shareholders to around $1 billion, including previous settlements.