AIG 2005 Annual Report Download - page 162

Notes to Consolidated Financial Statements Continued
In July 2005, a second amended complaint was filed in the
12. Commitments and Contingent Liabilities
consolidated derivative case in the Southern District of New
Continued
York, expanding upon accounting-related allegations, based
violated federal and various state antitrust laws, as well as upon the First Restatement and, in August 2005, an amended
federal RICO laws, various state deceptive and unfair practice consolidated complaint was filed. In June 2005, the derivative
laws and certain state laws governing fiduciary duties. The cases in Delaware were consolidated. AIG’s Board of Directors
alleged basis of these claims is that there was a conspiracy has appointed a special committee of independent directors to
between insurance companies and insurance brokers with review the matters asserted in the derivative complaints. The
regard to the use of contingent commission agreements, courts have approved agreements staying the derivative cases
bidding practices, and other broker-related conduct concerning pending in the Southern District of New York and in Delaware
coverage in certain sectors of the insurance industry. The Chancery Court while the special committee of independent
Judicial Panel on Multidistrict Litigation entered an order on directors performs its work. In September 2005, a shareholder
February 17, 2005, consolidating most of these cases and filed suit in Delaware Chancery Court seeking documents
transferring them to the United States District Court for the relating to some of the allegations made in the derivative suits.
District of New Jersey (District of New Jersey). The remainder AIG filed a motion to dismiss in October 2005.
of these cases have been transferred to the District of New In late 2002, a derivative action was filed in Delaware
Jersey. On August 15, 2005, the plaintiffs in the multidistrict Chancery Court in connection with AIG’s transactions with
litigation filed a Corrected First Consolidated Amended Com- certain entities affiliated with Starr and Starr International
mercial Class Action Complaint, which, in addition to the Company, Inc. (SICO). In May 2005, the plaintiff filed an
previously named AIG defendants, names new AIG subsidiaries amended complaint which adds additional claims premised on
as defendants. Also on August 15, 2005, AIG and two allegations relating to insurance brokerage practices and AIG’s
subsidiaries were named as defendants in a Corrected First non-traditional insurance products. Plaintiffs in that case have
Consolidated Amended Employee Benefits Class Action Com- agreed to dismiss newly added allegations unrelated to transac-
plaint filed in the District of New Jersey, which asserts similar tions with entities affiliated with Starr and SICO without
claims with respect to employee benefits insurance and a claim prejudice to pursuit of these claims in the separate derivative
under ERISA on behalf of putative classes of employers and actions described above. On February 16, 2006, the Delaware
employees. On November 29, 2005, the AIG defendants, along Chancery Court entered an order dismissing the litigation with
with other insurer defendants and the broker defendants filed prejudice with respect to AIG’s outside directors and dismissing
motions to dismiss both the Commercial and Employee the claims against the remaining AIG defendants without
Benefits Complaints. Plaintiffs have filed a motion for class prejudice.
certification in the consolidated action. In addition, complaints AIG cannot predict the outcome of the matters described
were filed against AIG and several of its subsidiaries in above or estimate the potential costs related to these matters
Massachusetts and Florida state courts, which have both been and, accordingly, no reserve is being established in AIG’s
stayed. In the Florida action, the plaintiff has filed a petition financial statements at this time. In the opinion of AIG
for a writ of certiorari with the District Court of Appeals of management, AIG’s ultimate liability for the unresolved
the State of Florida, Fourth District with respect to the stay matters referred to above is not likely to have a material
order. On February 9, 2006, a complaint against AIG and adverse effect on AIG’s consolidated financial condition,
several of its subsidiaries was filed in Texas state court, making although it is possible that the effect would be material to
claims similar to those in the federal cases above. AIG’s consolidated results of operations for an individual
In April and May 2005, amended complaints were filed in reporting period.
the consolidated derivative and securities cases, as well as in
one of the ERISA lawsuits, pending in the Southern District of (j) On July 8, 2005, SICO filed a complaint against AIG in
New York adding allegations concerning AIG’s accounting the Southern District of New York. The complaint alleges that
treatment for non-traditional insurance products. In September AIG is in the possession of items, including artwork, which
2005, a second amended complaint was filed in the consoli- SICO claims it owns, and seeks an order causing AIG to
dated securities cases adding allegations concerning AIG’s First release those items as well as actual, consequential, punitive
Restatement. Also in September 2005, a new securities action and exemplary damages. On September 27, 2005, AIG filed its
complaint was filed in the Southern District of New York, answer to SICO’s complaint denying SICO’s allegations and
asserting claims premised on the same allegations made in the asserting counter-claims for breach of contract, unjust enrich-
consolidated cases. Motions to dismiss have been filed in the ment, conversion and breach of fiduciary duty relating to
securities actions. In September 2005, a consolidated complaint SICO’s breach of its commitment to use its AIG shares for the
was filed in the ERISA case pending in the Southern District benefit of AIG and its employees. On October 17, 2005, SICO
of New York. Motions to dismiss have been filed in that replied to AIG’s counter-claims and additionally sought a
ERISA case. Also in April 2005, new derivative actions were judgment declaring that SICO is neither a control person nor
filed in Delaware Chancery Court, and in July and August an affiliate of AIG for purposes of Schedule 13D under the
2005, two new derivative actions were filed in the Southern Securities Exchange Act of 1934, as amended (the Exchange
District of New York asserting claims duplicative of the claims Act), and Rule 144 under the Securities Act of 1933, as
made in the consolidated derivative action.
110 AIG m Form 10-K