AIG 2006 Annual Report Download - page 71

American International Group, Inc. and Subsidiaries
consolidated by the judicial panel on multi-district litigation and Brown of the District of New Jersey transferred the multi-district
transferred to the United States District Court for the District of litigation to himself. Oral argument on the renewed motions to
New Jersey for coordinated pretrial proceedings. The consolidated dismiss has been scheduled before Chief Judge Brown on
actions have proceeded in that court in two parallel actions, In re March 1, 2007. Fact discover y in the multi-district litigation is
Insurance Brokerage Antitrust Litigation (the Commercial Com- ongoing.
plaint) and In re Employee Benefit Insurance Brokerage Antitrust A number of complaints making allegations similar to those in
Litigation (the Employee Benefits Complaint, and together with the the Commercial Complaint have been filed against AIG and other
Commercial Complaint, the multi-district litigation). defendants in state and federal courts around the country. The
The plaintiffs in the Commercial Complaint are nineteen defendants have thus far been successful in having the federal
corporations, individuals and public entities that contracted with actions transferred to the District of New Jersey and consolidated
the broker defendants for the provision of insurance brokerage into the multi-district litigation. The defendants have also sought
services for a variety of insurance needs. The broker defendants to have state court actions making similar allegations stayed
are alleged to have placed insurance coverage on the plaintiffs’ pending resolution of the multi-district litigation. In one state court
behalf with a number of insurance companies named as defend- action pending in Florida, the trial court recently decided not to
ants, including AIG subsidiaries. The Commercial Complaint also grant an additional stay, but instead to allow the case to proceed.
named ten brokers and fourteen other insurers (one of which has Litigation Relating to 21st Century. Shortly after the announce-
since settled) as defendants. The Commercial Complaint alleges ment in late January 2007 of AIG’s offer to acquire the
that defendants engaged in a widespread conspiracy to allocate outstanding shares of 21st Century not already owned by AIG and
customers through ‘‘bid-rigging’’ and ‘‘steering’’ practices. The its subsidiaries, two related class actions were filed in the
Commercial Complaint also alleges that the insurer defendants Superior Court of California, Los Angeles County against AIG,
permitted brokers to place business with AIG subsidiaries through 21st Century and the individual members of 21st Century’s Board
wholesale intermediaries affiliated with or owned by those same of Directors, two of whom are current executive officers of AIG.
brokers rather than placing the business with AIG subsidiaries The actions were filed purportedly on behalf of the minority
directly. Finally, the Commercial Complaint alleges that the insurer shareholders of 21st Century and assert breaches of fiduciary
defendants entered into agreements with broker defendants that duty in connection with the AIG proposal. The complaints allege
tied insurance placements to reinsurance placements in order to that the proposed per share price is unfair and seek preliminary
provide additional compensation to each broker. Plaintiffs assert and permanent injunctive relief to enjoin the consummation of the
that the defendants violated the Sherman Antitrust Act, RICO, the proposed transaction.
antitrust laws of 48 states and the District of Columbia, and are SICO. In July, 2005, SICO filed a complaint against AIG in the
liable under common law breach of fiduciary duty and unjust Southern District of New York, claiming that AIG had refused to
enrichment theories. Plaintiffs seek treble damages plus interest provide SICO access to certain artwork and asked the court to
and attorneys’ fees as a result of the alleged RICO and Sherman order AIG immediately to release the property to SICO. AIG filed
Act violations. an answer denying SICO’s allegations and setting forth defenses
The plaintiffs in the Employee Benefits Complaint are nine to SICO’s claims. In addition, AIG filed counterclaims asserting
individual employees and corporate and municipal employers breach of contract, unjust enrichment, conversion, breach of
alleging claims on behalf of two separate nationwide purported fiduciary duty, a constructive trust and declaratory judgment,
classes: an employee class and an employer class that acquired relating to SICO’s breach of its commitment to use its AIG shares
insurance products from the defendants from August 26, 1994 to only for the benefit of AIG and AIG employees. Fact and expert
the date of any class certification. The Employee Benefits discovery has been substantially concluded and briefing on SICO’s
Complaint names AIG, as well as eleven brokers and five other motion for summary judgment is underway.
insurers, as defendants. The activities alleged in the Employee
Benefits Complaint, with certain exceptions, track the allegations Effect on AIG
of contingent commissions, bid-rigging and tying made in the In the opinion of AIG management, AIG’s ultimate liability for the
Commercial Complaint. unresolved matters referred to above is not likely to have a
On October 3, 2006, Judge Hochberg of the District of New material adverse effect on AIG’s consolidated financial condition,
Jersey reserved in part and denied in part motions filed by the although it is possible that the effect would be material to AIG’s
insurer defendants and broker defendants to dismiss the multi- consolidated results of operations for an individual reporting
district litigation. The Court also ordered the plaintiffs in both period.
actions to file supplemental statements of particularity to elabo-
rate on the allegations in their complaints. Plaintiffs filed their Item 4.
supplemental statements on October 25, 2006, and the AIG Submission of Matters to a Vote of Security
defendants, along with other insurer and broker defendants in the Holders
two consolidated actions, filed renewed motions to dismiss on
November 30, 2006. Briefing has been completed on the renewed There were no matters submitted to a vote of security holders
motions to dismiss, as well as plaintiffs’ motion for class during the fourth quarter of 2006.
certification in both cases. On February 16, 2007, Chief Judge
Form 10-K 2006 AIG 21