AIG 2006 Annual Report Download - page 70

American International Group, Inc. and Subsidiaries
government investigations. In addition, the lead plaintiff alleges Derivative Actions — Delaware Chancery Court. From October
that AIG’s former Chief Executive Officer manipulated AIG’s stock 2004 to April 2005, AIG shareholders filed five derivative
price. The lead plaintiff asserts claims for violations of Sec- complaints in the Delaware Chancery Court. All of these derivative
tions 11 and 15 of the Securities Act, Section 10(b) of the lawsuits have been consolidated into a single action. The
Exchange Act, and Rule 10b-5 promulgated thereunder, Sec- amended consolidated complaint names 43 defendants (not
tion 20(a) of the Exchange Act, and Section 20A of the Exchange including nominal defendant AIG) who, like the New York consoli-
Act. In April 2006, the court denied the defendants’ motions to dated derivative litigation, are current and former officers and
dismiss the second amended class action complaint and the directors of AIG, as well as other entities and certain of their
Florida complaint. In December 2006, a third amended class current and former employees and directors. The factual allega-
action complaint was filed, which does not differ substantially tions, legal claims and relief sought in the Delaware action are
from the prior complaint. Fact and class discovery is currently similar to those alleged in the New York derivative actions, except
ongoing. that plaintiffs in the Delaware derivative action assert claims only
ERISA Action. Between November 30, 2004 and July 1, 2005, under state law. The court has approved agreements staying the
several Employee Retirement Income Security Act of 1974 (ERISA) derivative case pending in the Delaware Chancery Court while the
actions were filed on behalf of a purported class of participants special committee performs its work. The current stay extends
and beneficiaries of three pension plans sponsored by AIG or its until March 14, 2007.
subsidiaries. A consolidated complaint filed on September 26, An additional derivative lawsuit, filed in the Delaware Chancery
2005 alleges a class period between September 30, 2000 and Court in December 2002 against twenty directors and executives
May 31, 2005 and names as defendants AIG, the members of of AIG as well as against AIG as a nominal defendant, alleges,
AIG’s Retirement Board and the Administrative Boards of the among other things, that the directors of AIG breached the
plans at issue, and four present or former members of AIG’s fiduciary duties of loyalty and care by approving the payment of
Board of Directors. The factual allegations in the complaint are commissions to Starr and of rental and service fees to SICO and
essentially identical to those in the securities actions described the executives breached their duty of loyalty by causing AIG to
above. Plaintiffs allege that defendants violated duties under enter into contracts with Starr and SICO and their fiduciary duties
ERISA by allowing the plans to offer AIG stock as a permitted by usurping AIG’s corporate opportunity. The complaint further
investment, when defendants allegedly knew it was not a prudent alleges that the Starr agencies did not provide any services that
investment, and by failing to provide participants with accurate AIG was not capable of providing itself, and that the diversion of
information about AIG stock. AIG’s motion to dismiss was denied commissions to these entities was solely for the benefit of Starr’s
on December 12, 2006. Discovery will be consolidated with owners. The complaint also alleged that the service fees and
proceedings in the securities actions. rental payments made to SICO and its subsidiaries were improper.
Derivative Actions — Southern District of New York. Between Under the terms of a stipulation approved by the Court on
October 25, 2004 and July 14, 2005, seven separate derivative February 16, 2006, the claims against the outside independent
actions were filed in the Southern District of New York, five of which directors were dismissed with prejudice, while the claims against
were consolidated into a single action. The New York derivative the other directors were dismissed without prejudice. On Octo-
complaint contains nearly the same types of allegations made in ber 31, 2005, Messrs. Greenberg, Matthews and Smith, SICO and
the securities fraud and ERISA actions described above. The named Starr filed motions to dismiss the amended complaint. In an
defendants include current and former officers and directors of AIG, opinion dated June 21, 2006, the Court denied defendants’
as well as Marsh, SICO, Starr, ACE Limited and subsidiaries (ACE), motion to dismiss, except with respect to plaintiff’s challenge to
General Reinsurance Corporation, PwC, and certain employees or payments made to Starr before January 1, 2000. On July 21,
officers of these entity defendants. Plaintiffs assert claims for 2006, plaintiff filed its second amended complaint, which alleges
breach of fiduciary duty, gross mismanagement, waste of corporate that, between January 1, 2000 and May 31, 2005, individual
assets, unjust enrichment, insider selling, auditor breach of defendants breached their duty of loyalty by causing AIG to enter
contract, auditor professional negligence and disgorgement from into contracts with Starr and SICO and breached their fiduciary
AIG’s former Chief Executive Officer and Chief Financial Officer of duties by usurping AIG’s corporate opportunity. Starr is charged
incentive-based compensation and AIG share proceeds under with aiding and abetting breaches of fiduciary duty and unjust
Section 304 of the Sarbanes-Oxley Act, among others. Plaintiffs enrichment for its acceptance of the fees. SICO is no longer
seek, among other things, compensatory damages, corporate named as a defendant. Discovery is currently ongoing.
governance reforms, and a voiding of the election of certain AIG Policyholder Actions. After the NYAG filed its complaint against
directors. AIG’s Board of Directors has appointed a special insurance broker Marsh, policyholders brought multiple federal
committee of independent directors (special committee) to review antitrust and the Racketeer Influenced and Corrupt Organizations
the matters asserted in the operative consolidated derivative Act (RICO) class actions in jurisdictions across the nation against
complaint. The court has approved agreements staying the deriva- insurers and brokers, including AIG and a number of its subsidiar-
tive case pending in the Southern District of New York while the ies, alleging that the insurers and brokers engaged in a broad
special committee performs its work. The current stay extends until conspiracy to allocate customers, steer business, and rig bids.
March 14, 2007. These actions, including 18 complaints filed in different federal
courts naming AIG or an AIG subsidiary as a defendant, were
20 AIG 2006 Form 10-K