AIG 2011 Annual Report Download - page 331

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
from AIG and certain of its counterparties. The complaint seeks unspecified damages pursuant to the False
Claims Act in the amount of three times the damages allegedly sustained by the United States as well as interest,
attorneys’ fees, costs and expenses. The complaint and amended complaints were initially filed and maintained
under seal while the United States considered whether to intervene in the action. On or about April 28, 2011,
after the United States declined to intervene, the District Court lifted the seal, and Relators served the amended
complaint on AIG on July 11, 2011.
On October 14, 2011, the defendants that had been served filed motions to dismiss the amended complaint,
which are currently pending. The Court will hear oral argument on those motions on April 23, 2012. The Relators
have not specified in their amended complaint an amount of alleged damages. As a result, AIG is unable to
reasonably estimate the possible loss or range of losses, if any, arising from the litigation.
2006 Regulatory Settlements and Related Regulatory Matters
2006 Regulatory Settlements. In February 2006, AIG reached a resolution of claims and matters under
investigation with the United States Department of Justice (DOJ), the Securities and Exchange Commission
(SEC), the Office of the New York Attorney General (NYAG) and the New York State Department of Insurance
(DOI). The settlements resolved investigations conducted by the SEC, NYAG and DOI in connection with the
accounting, financial reporting and insurance brokerage practices of AIG and its subsidiaries, as well as claims
relating to the underpayment of certain workers’ compensation premium taxes and other assessments. These
settlements did not, however, resolve investigations by regulators from other states into insurance brokerage
practices related to contingent commissions and other broker-related conduct, such as alleged bid rigging. Nor did
the settlements resolve any obligations that AIG may have to state guarantee funds in connection with any of
these matters.
As a result of these settlements, AIG made payments or placed amounts in escrow in 2006 totaling
approximately $1.64 billion, $225 million of which represented fines and penalties.
In addition to the escrowed funds, $800 million was deposited into, and subsequently disbursed by, a fund under
the supervision of the SEC, to resolve claims asserted against AIG by investors, including the securities class
action and shareholder lawsuits described below. Additional amounts held in escrow totaling approximately
$597 million, including interest thereon, are included in Other assets at December 31, 2011, and, as discussed
below, are specifically designated to satisfy regulatory and class-action liabilities related to workers’ compensation
premium reporting issues. Approximately $338 million of the $597 million of the current total workers’
compensation related escrow amount was originally held in an account established as part of the 2006 New York
regulatory settlement and referred to as the Workers’ Compensation Fund.
On February 1, 2012, AIG was informed by the SEC that AIG had complied with the terms of the settlement
order under which AIG had agreed to retain an independent consultant, and as of that date, was no longer
subject to such order.
Other Regulatory Settlements. AIG’s 2006 regulatory settlements with the SEC, DOJ, NYAG and DOI did not
resolve investigations by regulators from other states into insurance brokerage practices. AIG entered into
agreements effective in early 2008 with the Attorneys General of the States of Florida, Hawaii, Maryland,
Michigan, Oregon, Texas and West Virginia; the Commonwealths of Massachusetts and Pennsylvania; and the
District of Columbia; as well as the Florida Department of Financial Services and the Florida Office of Insurance
Regulation, relating to their respective industry-wide investigations into producer compensation and insurance
placement practices. The settlements called for total payments of $26 million by AIG, of which $4.4 million was
paid under previous settlement agreements. During the term of the settlement agreements, which run through
early 2018, AIG will continue to maintain certain producer compensation disclosure and ongoing compliance
initiatives. AIG will also continue to cooperate with the industry-wide investigations. On April 7, 2010, it was
announced that AIG and the Ohio Attorney General entered into a settlement agreement to resolve the Ohio
AIG 2011 Form 10-K 317