AIG 2007 Annual Report Download - page 76

American International Group, Inc. and Subsidiaries
government investigations. In addition, the lead plaintiff alleges regarding its exposure to what the lawsuits describe as the
that AIG’s former Chief Executive Officer manipulated AIG’s stock subprime market crisis. The actions were consolidated as In re
price. The lead plaintiff asserts claims for violations of Sec- American International Group, Inc. 2007 Derivative Litigation. On
tions 11 and 15 of the Securities Act of 1933, Section 10(b) of February 15, 2008, plaintiffs filed a consolidated amended
the Exchange Act, and Rule 10b-5 promulgated thereunder, complaint alleging the same causes of action.
Section 20(a) of the Exchange Act, and Section 20A of the Between October 25, 2004 and July 14, 2005, seven separate
Exchange Act. In April 2006, the court denied the defendants’ derivative actions were filed in the Southern District of New York,
motions to dismiss the second amended class action complaint five of which were consolidated into a single action. The New York
and the Florida complaint. In December 2006, a third amended derivative complaint contains nearly the same types of allegations
class action complaint was filed, which does not differ substan- made in the securities fraud and ERISA actions described above.
tially from the prior complaint. Fact and class discovery is The named defendants include current and former officers and
currently ongoing. On February 20, 2008, the lead plaintiff filed a directors of AIG, as well as Marsh & McLennan Companies, Inc.
motion for class certification. (Marsh), SICO, Starr, ACE Limited and subsidiaries (ACE), General
ERISA Action. Between November 30, 2004 and July 1, 2005, Reinsurance Corporation, PwC, and certain employees or officers
several Employee Retirement Income Security Act of 1974 of these entity defendants. Plaintiffs assert claims for breach of
(ERISA) actions were filed on behalf of purported class of fiduciary duty, gross mismanagement, waste of corporate assets,
participants and beneficiaries of three pension plans sponsored unjust enrichment, insider selling, auditor breach of contract,
by AIG or its subsidiaries. A consolidated complaint filed on auditor professional negligence and disgorgement from AIG’s
September 26, 2005 alleges a class period between Septem- former Chief Executive Officer and Chief Financial Officer of
ber 30, 2000 and May 31, 2005 and names as defendants AIG, incentive-based compensation and AIG share proceeds under
the members of AIG’s Retirement Board and the Administrative Section 304 of the Sarbanes-Oxley Act, among others. Plaintiffs
Boards of the plans at issue, and four present or former members seek, among other things, compensator y damages, corporate
of AIG’s Board of Directors. The factual allegations in the governance reforms, and a voiding of the election of certain AIG
complaint are essentially identical to those in the securities directors. AIG’s Board of Directors has appointed a special
actions described above. The parties have reached an agreement committee of independent directors (special committee) to review
in principle to settle this matter for an amount within AIG’s the matters asserted in the operative consolidated derivative
insurance coverage limits. complaint. The court has entered an order staying the derivative
case in the Southern District of New York pending resolution of
Securities Action — Oregon State Court. On February 27, 2008, the consolidated derivative action in the Delaware Chancery Court
The State of Oregon, by and through the Oregon State Treasurer, (discussed below). The court also has entered an order that
and the Oregon Public Employee Retirement Board, on behalf of termination of certain named defendants from the Delaware
the Oregon Public Employee Retirement Fund, filed a lawsuit derivative action applies to the New York derivative action without
against American International Group, Inc. for damages arising out further order of the court. On October 17, 2007, plaintiffs and
of plaintiffs’ purchase of AIG common stock at prices that those AIG officer and director defendants against whom the
allegedly were inflated. Plaintiffs allege, among other things, that shareholder plaintiffs in the Delaware action are no longer
AIG: (1) made false and misleading statements concerning its pursuing claims filed a stipulation providing for all claims in the
accounting for a $500 million transaction with General Re; New York action against such defendants to be dismissed with
(2) concealed that it marketed and misrepresented its control over prejudice. Former directors and officers Maurice R. Greenberg and
off-shore entities in order to improve financial results; (3) improp- Howard I. Smith have asked the court to refrain from so ordering
erly accounted for underwriting losses as investment losses in this stipulation.
connection with transactions involving CAPCO Reinsurance Com-
pany, Ltd. and Union Excess; (4) misled investors about the scope Derivative Actions — Delaware Chancery Court. From October
of government investigations; and (5) engaged in market manipu- 2004 to April 2005, AIG shareholders filed five derivative
lation through its then Chairman and CEO Maurice R. Greenberg. complaints in the Delaware Chancery Court. All of these derivative
The complaint asserts claims for violations of Oregon Securities lawsuits were consolidated into a single action as In re American
Law, and seeks compensatory damages in an amount in excess International Group, Inc. Consolidated Derivative Litigation. The
of $15 million, and prejudgement interest and costs and fees. amended consolidated complaint named 43 defendants (not
including nominal defendant AIG) who, like the New York consoli-
Derivative Actions — Southern District of New York. On November dated derivative litigation, were current and former officers and
20, 2007, two purported shareholder derivative actions were filed directors of AIG, as well as other entities and certain of their
in the Southern District of New York naming as defendants the current and former employees and directors. The factual allega-
then-current directors of AIG and certain senior officers of AIG and tions, legal claims and relief sought in the Delaware action are
its subsidiaries. Plaintiffs assert claims for breach of fiduciary similar to those alleged in the New York derivative actions, except
duty, waste of corporate assets and unjust enrichment, as well as that shareholder plaintiffs in the Delaware derivative action assert
violations of Section 10(b) of the Exchange Act and Rule 10b-5 claims only under state law. Earlier in 2007, the Court approved
promulgated thereunder, and Section 20(a) of the Exchange Act, an agreement that AIG be realigned as plaintiff, and, on June 13,
among other things, in connection with AIG’s public disclosures
22 AIG 2007 Form 10-K