AIG 2011 Annual Report Download - page 333

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
used ‘‘income smoothing’’ products and other techniques to inflate its earnings; (iii) concealed that it marketed
and sold ‘‘income smoothing’’ insurance products to other companies; and (iv) misled investors about the scope of
government investigations. In addition, the lead plaintiff alleges that Maurice R. Greenberg, AIG’s former Chief
Executive Officer, manipulated AIG’s stock price. The lead plaintiff asserts claims for violations of Sections 11
and 15 of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and
Sections 20(a) and Section 20A of the Exchange Act.
On July 14, 2010, AIG approved the terms of a settlement (the Settlement) with lead plaintiffs. The Settlement
is conditioned on, among other things, court approval and a minimum level of shareholder participation. Under
the terms of the Settlement, if consummated, AIG would pay an aggregate of $725 million.
On July 20, 2010, at the joint request of AIG and lead plaintiffs, the District Court entered an order staying all
deadlines in the case. On November 30, 2010, AIG and lead plaintiffs executed their agreement of settlement and
compromise. On November 30, 2010, lead plaintiffs filed a motion for preliminary approval of the settlement with
AIG.
On October 5, 2011, the District Court granted lead plaintiffs’ motion for preliminary approval of the settlement
between AIG and lead plaintiffs. Notices to class members of the settlement were mailed on October 14, 2011. On
December 2, 2011, Lead Plaintiff filed a motion for final approval of the settlement and for attorneys’ fees.
Objections to the settlement and requests to be excluded from the settlement were due to the District Court by
December 30, 2011. Only two shareholders objected to the settlement, and 25 shareholders claiming to hold less
than 1.5 percent of AIG’s outstanding shares at the end of the class period submitted timely and valid requests to
opt out of the class. Of those 25 shareholders, seven are investment funds controlled by the same investment
group, and that investment group is the only opt-out who held more than 1,000 shares at the end of the class
period. By order dated February 2, 2012, the District Court granted lead plaintiffs’ motion for final approval of
the Settlement between AIG and lead plaintiffs. AIG has fully funded the amount of the Settlement into an
escrow account. On February 17, 2012, one of the objectors filed a notice to appeal the District Court’s
February 2, 2012 order to the Court of Appeals for the Second Circuit.
On January 23, 2012, AIG and the Florida pension funds, who had brought a separate securities fraud action,
executed a settlement agreement. Under the terms of the settlement agreement, AIG paid $4 million.
The Multi-District Litigation. Commencing in 2004, policyholders brought multiple federal antitrust and
Racketeer Influenced and Corrupt Organizations Act (RICO) class actions in jurisdictions across the nation
against insurers and brokers, including AIG and a number of its subsidiaries, alleging that the insurers and
brokers engaged in one or more broad conspiracies to allocate customers, steer business, and rig bids. These
actions, including 24 complaints filed in different federal courts naming AIG or an AIG subsidiary as a defendant,
were consolidated by the judicial panel on multi-district litigation and transferred to the United States District
Court for the District of New Jersey (District of New Jersey) for coordinated pretrial proceedings. The
consolidated actions have proceeded in that Court in two parallel actions, In re Insurance Brokerage Antitrust
Litigation (the Commercial Complaint) and In re Employee Benefits Insurance Brokerage Antitrust Litigation
(the Employee Benefits Complaint, and, together with the Commercial Complaint, the Multi-District Litigation).
The plaintiffs in the Commercial Complaint are a group of corporations, individuals and public entities that
contracted with the broker defendants for the provision of insurance brokerage services for a variety of insurance
needs. The broker defendants are alleged to have placed insurance coverage on the plaintiffs’ behalf with a
number of insurance companies named as defendants, including AIG subsidiaries. The Commercial Complaint
also named various brokers and other insurers as defendants (three of which have since settled). The Commercial
Complaint alleges that defendants engaged in a number of overlapping ‘‘broker-centered’’ conspiracies to allocate
customers through the payment of contingent commissions to brokers and through purported ‘‘bid-rigging’’
practices. It also alleges that the insurer and broker defendants participated in a ‘‘global’’ conspiracy not to
disclose to policyholders the payment of contingent commissions. Plaintiffs assert that the defendants violated the
AIG 2011 Form 10-K 319