AIG 2005 Annual Report Download - page 71

AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
February 17, 2005, consolidating most of these cases and
Investigations of Insurance Practices
transferring them to the United States District Court for the
Regulators from several states have commenced investigations District of New Jersey (District of New Jersey). The remainder
into insurance brokerage practices related to contingent com- of these cases have been transferred to the District of New
missions and other broker-related conduct, such as alleged bid Jersey. On August 15, 2005, the plaintiffs in the multidistrict
rigging. Various parties, including insureds and shareholders, litigation filed a Corrected First Consolidated Amended Com-
have also asserted putative class action and other claims mercial Class Action Complaint, which, in addition to the
against AIG or its subsidiaries alleging, among other things, previously named AIG defendants, names new AIG subsidiaries
violations of the antitrust and federal securities laws, and AIG as defendants. Also on August 15, 2005, AIG and two
expects that additional claims may be made. Pursuant to the subsidiaries were named as defendants in a Corrected First
settlements with the NYAG and the DOI, $375 million was Consolidated Amended Employee Benefits Class Action Com-
paid into a fund under the supervision of the NYAG and the plaint filed in the District Court of New Jersey, which asserts
DOI to be available principally to pay certain AIG insureds similar claims with respect to employee benefits insurance and
who purchased excess casualty policies through Marsh Inc. In a claim under ERISA on behalf of putative classes of employers
addition, approximately $343 million will be used to compen- and employees. On November 29, 2005, the AIG defendants,
sate participating states in connection with the underpayment along with other insurer defendants and the broker defendants
of certain workers compensation premium taxes and other filed motions to dismiss both the Commercial and Employee
assessments. It is likely that many of the claims arising from Benefits Complaints. Plaintiffs have filed a motion for class
state investigations, as well as claims made by insureds, will be certification in the consolidated action. In addition, complaints
settled using these funds. were filed against AIG and several of its subsidiaries in
Various federal and state regulatory agencies are reviewing Massachusetts and Florida state courts, which have both been
certain other transactions and practices of AIG and its stayed. In the Florida action, the plaintiff has filed a petition
subsidiaries in connection with industry-wide and other inquir- for a writ of certiorari with the District Court of Appeals of
ies. AIG has cooperated, and will continue to cooperate, with the State of Florida, Fourth District with respect to the stay
all these investigations, including by producing documents and order. On February 9, 2006, a complaint against AIG and
other information in response to the subpoenas. several of its subsidiaries was filed in Texas state court, making
claims similar to those in the federal cases above.
Pending Litigation In April and May 2005, amended complaints were filed in
the consolidated derivative and securities cases, as well as in
A number of lawsuits have been filed regarding the subject one of the ERISA lawsuits, pending in the Southern District of
matter of the investigations of insurance brokerage practices, New York adding allegations concerning AIG’s accounting
including derivative actions, individual actions and class treatment for non-traditional insurance products. In September
actions under the federal securities laws, Racketeering Influ- 2005, a second amended complaint was filed in the consoli-
enced and Corrupt Organizations Act (RICO), Employee dated securities cases adding allegations concerning AIG’s First
Retirement Income Security Act (ERISA) and state common Restatement. Also in September 2005, a new securities action
and corporate laws in both federal and state courts, including complaint was filed in the Southern District of New York,
the federal district court in the United States District Court asserting claims premised on the same allegations made in the
for the Southern District of New York (Southern District of consolidated cases. Motions to dismiss have been filed in the
New York), in the Commonwealth of Massachusetts Superior securities actions. In September 2005, a consolidated complaint
Court and in the Delaware Chancery Court. All of these was filed in the ERISA case pending in the Southern District
actions generally allege that AIG and its subsidiaries violated of New York. Motions to dismiss have been filed in that
the law by allegedly concealing a scheme to ‘‘rig bids’’ and ERISA case. Also in April 2005, new derivative actions were
‘‘steer’’ business between insurance companies and insurance filed in the Delaware Chancery Court, and in July and August
brokers. 2005, two new derivative actions were filed in the Southern
Since October 19, 2004, AIG or its subsidiaries have been District of New York asserting claims duplicative of the claims
named as a defendant in fifteen complaints that were filed in made in the consolidated derivative action.
federal court and two that were originally filed in state court In July 2005, a second amended complaint was filed in the
(Massachusetts and Florida) and removed to federal court. consolidated derivative case in the Southern District of New
These cases generally allege that AIG and its subsidiaries York, expanding upon accounting-related allegations based
violated federal and various state antitrust laws, as well as upon AIG’s First Restatement and, in August 2005, an
federal RICO laws, various state deceptive and unfair practice amended consolidated complaint was filed. In June 2005, the
laws and certain state laws governing fiduciary duties. The derivative cases in Delaware were consolidated. AIG’s Board of
alleged basis of these claims is that there was a conspiracy Directors has appointed a special committee of independent
between insurance companies and insurance brokers with directors to review the matters asserted in the derivative
regard to the use of contingent commission agreements, complaints. The courts have approved agreements staying the
bidding practices, and other broker-related conduct concerning derivative cases pending in the Southern District of New York
coverage in certain sectors of the insurance industry. The and in the Delaware Chancery Court while the special
Judicial Panel on Multidistrict Litigation entered an order on committee of independent directors performs its work. In
AIG m Form 10-K 19