AIG 2008 Annual Report Download - page 287

program. On January 21, 2009, S&P downgraded ILFC’s short-term credit rating and, as a result, ILFC could no
longer participate in the CPFF. The $1.7 billion ILFC had borrowed under the CPFF was due and paid on
January 28, 2009. As of December 31, 2008 and February 18, 2009, the other three affiliates had borrowed a total of
approximately $14.5 billion and $14 billion, respectively, under this facility. These AIG affiliates are participating
under the CPFF’s standard terms and conditions.
Proceeds from the issuance of the commercial paper under the CPFF are used to refinance AIG’s outstanding
commercial paper as it matures, meet other working capital needs and make voluntary repayments under the Fed
Facility. The voluntary repayments of the Fed Facility do not reduce the amount available to be borrowed
thereunder.
14. Commitments, Contingencies and Guarantees
In the normal course of business, various commitments and contingent liabilities are entered into by AIG and
certain of its subsidiaries. In addition, AIG guarantees various obligations of certain subsidiaries.
(a) Litigation and Investigations
Litigation Arising from Operations. AIG and its subsidiaries, in common with the insurance and financial
services industries in general, are subject to litigation, including claims for punitive damages, in the normal course
of their business. In AIG’s insurance operations, litigation arising from claims settlement activities is generally
considered in the establishment of AIG’s liability for unpaid claims and claims adjustment expense. However, the
potential for increasing jury awards and settlements makes it difficult to assess the ultimate outcome of such
litigation.
Various federal, state and foreign regulatory and governmental agencies are reviewing certain public
disclosures, transactions and practices of AIG and its subsidiaries in connection with AIG’s liquidity problems
industry-wide and other inquiries. These reviews include inquiries by the SEC and U.S. Department of Justice
(DOJ) with respect to AIG’s valuation of and disclosures relating to the AIGFP super senior credit default swap
portfolio and the U.K. Serious Fraud Office with respect to the UK operations of AIGFP. AIG has cooperated, and
will continue to cooperate, in producing documents and other information in response to subpoenas and other
requests.
In connection with some of the SEC investigations, AIG understands that some of its employees have received
Wells notices and it is possible that additional current and former employees could receive similar notices in the
future. Under SEC procedures, a Wells notice is an indication that the SEC staff has made a preliminary decision to
recommend enforcement action that provides recipients with an opportunity to respond to the SEC staff before a
formal recommendation is finalized.
Although AIG cannot currently quantify its ultimate liability for the unresolved litigation and investigation
matters referred to below, it is possible that such liability could have a material adverse effect on AIG’s consolidated
financial condition, consolidated results of operations or consolidated cash flow for an individual reporting period.
Litigation Relating to AIGFP’s Super Senior Credit Default Swap Portfolio
Securities Actions — Southern District of New York. On May 21, 2008, a purported securities fraud class
action complaint was filed against AIG and certain of its current and former officers and directors in the United
States District Court for the Southern District of New York (the Southern District of New York). The complaint
alleges that defendants made statements during the period May 11, 2007 through May 9, 2008 in press releases,
AIG’s quarterly and year-end filings and during conference calls with analysts which were materially false and
misleading and which artificially inflated the price of AIG’s stock. The alleged false and misleading statements
relate to, among other things, unrealized market valuation losses on AIGFP’s super senior credit default swap
portfolio as a result of severe credit market disruption. The complaint alleges claims under Sections 10(b) and 20(a)
of the Exchange Act. Three additional purported securities class action complaints were subsequently filed in the
AIG 2008 Form 10-K 281
American International Group, Inc., and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)