AIG 2007 Annual Report Download - page 232

American International Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Continued
the settlement agreements and continues to deny the allegations.
12. Commitments, Contingencies and
Nevertheless, AIG agreed to settle in order to avoid the expense
Guarantees
and uncertainty of protracted litigation. The settlement agree-
Continued
ments, which remain subject to court approvals, were reached
States Court of Appeals for the Third Circuit on October 10, 2007. with the Attorneys General of the States of Florida, Hawaii,
Several similar actions that were consolidated before Chief Judge Maryland, Michigan, Oregon, Texas and West Virginia, the Com-
Brown are still pending in the District Court. Those actions are monwealths of Massachusetts and Pennsylvania, and the District
currently stayed pending a decision by the court on whether they of Columbia, the Florida Department of Financial Services, and
will proceed during the appeal of the dismissal of the Second the Florida Office of Insurance Regulation. The agreement with the
Commercial Complaint and the Second Employee Benefits Texas Attorney General also settles allegations of anticompetitive
Complaint. conduct relating to AIG’s relationship with Allied World Assurance
On August 24, 2007, the Ohio Attorney General filed a Company and includes an additional settlement payment of
complaint in the Ohio Court of Common Pleas against AIG and a $500,000 related thereto.
number of its subsidiaries, as well as several other broker and Wells Notices. AIG understands that some of its employees
insurer defendants, asserting violation of Ohio’s antitrust laws. have received Wells notices in connection with previously dis-
The complaint, which is similar to the Second Commercial closed SEC investigations of certain of AIG’s transactions or
Complaint, alleges that AIG and the other broker and insurer accounting practices. Under SEC procedures, a Wells notice is an
defendants conspired to allocate customers, divide markets, and indication that the SEC staff has made a preliminary decision to
restrain competition in commercial lines of casualty insurance recommend enforcement action that provides recipients with an
sold through the broker defendant. The complaint seeks treble opportunity to respond to the SEC staff before a formal
damages on behalf of Ohio public purchasers of commercial recommendation is finalized. It is possible that additional current
casualty insurance, disgorgement on behalf of both public and and former employees could receive similar notices in the future
private purchasers of commercial casualty insurance, as well as a as the regulatory investigations proceed.
$500 per day penalty for each day of conspiratorial conduct. AIG,
along with other co-defendants, moved to dismiss the complaint Effect on AIG
on November 16, 2007. Discovery is stayed in the case pending
a ruling on the motion to dismiss or until May 15, 2008, In the opinion of AIG management, AIG’s ultimate liability for the
whichever occurs first. unresolved litigation and investigation matters referred to above is
SICO. In July, 2005, SICO filed a complaint against AIG in the not likely to have a material adverse effect on AIG’s consolidated
Southern District of New York, claiming that AIG had refused to financial condition, although it is possible that the effect would be
provide SICO access to certain artwork and asked the court to material to AIG’s consolidated results of operations for an
order AIG immediately to release the property to SICO. AIG filed individual reporting period.
an answer denying SICO’s allegations and setting forth defenses (b) Commitments
to SICO’s claims. In addition, AIG filed counterclaims asserting
breach of contract, unjust enrichment, conversion, breach of Flight Equipment
fiduciary duty, a constructive trust and declaratory judgment,
At December 31, 2007, ILFC had committed to purchase 234 new
relating to SICO’s breach of its commitment to use its AIG shares
aircraft deliverable from 2008 through 2017 at an estimated
only for the benefit of AIG and AIG employees. Fact and expert
aggregate purchase price of $20.1 billion. ILFC will be required to
discovery has been concluded and SICO’s motion for summary
find customers for any aircraft acquired, and it must arrange
judgment is pending.
financing for portions of the purchase price of such equipment.
Regulatory Investigations. Regulators from several states have
commenced investigations into insurance brokerage practices Minimum future rental income on noncancelable operating
related to contingent commissions and other industry wide leases of flight equipment which have been delivered at
practices as well as other broker-related conduct, such as alleged December 31, 2007 was as follows:
bid-rigging. In addition, various federal, state and foreign regula-
(in millions)
tory and governmental agencies are reviewing certain transactions
and practices of AIG and its subsidiaries in connection with 2008 $ 4,142
industry wide and other inquiries. AIG has cooperated, and will 2009 3,783
continue to cooperate, in producing documents and other informa- 2010 3,274
tion in response to subpoenas and other requests. On Janu- 2011 2,726
2012 2,075
ary 29, 2008, AIG reached settlement agreements with nine
Remaining years after 2012 4,921
states and the District of Columbia. The settlement agreements
call for AIG to pay a total of $12.5 million to be allocated among Total $20,921
the ten jurisdictions and also require AIG to continue to maintain Flight equipment is leased, under operating leases, with
certain producer compensation disclosure and ongoing compliance remaining terms ranging from 1 to 12 years.
initiatives. AIG will also continue to cooperate with these states in
their ongoing investigations. AIG has not admitted liability under
178 AIG 2007 Form 10-K