AIG 2009 Annual Report Download - page 308

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Derivative Action — Southern District of New York. Between October 25, 2004 and July 14, 2005, seven separate
derivative actions were filed in the Southern District of New York, five of which were consolidated into a single action
(the New York 2004/2005 Derivative Litigation). The complaint in this action contains nearly the same types of
allegations made in the securities fraud action described above. The named defendants include current and former
officers and directors of AIG, as well as Marsh & McLennan Companies, Inc. (Marsh), SICO, Starr, ACE Limited
and subsidiaries (Ace), General Re, PwC, and certain employees or officers of these entity defendants. Plaintiffs assert
claims for breach of fiduciary duty, gross mismanagement, waste of corporate assets, unjust enrichment, insider
selling, auditor breach of contract, auditor professional negligence and disgorgement from AIG’s former Chief
Executive Officer, Maurice R. Greenberg, and former Chief Financial Officer, Howard I. Smith, of incentive-based
compensation and AIG share proceeds under Section 304 of the Sarbanes-Oxley Act, among others. Plaintiffs seek,
among other things, compensatory damages, corporate governance reforms, and a voiding of the election of certain
AIG directors. AIG’s Board of Directors has appointed a special committee of independent directors (Special
Committee) to review the matters asserted in the operative consolidated derivative complaint. The Court has entered
an order staying this action pending resolution of the Delaware 2004/2005 Derivative Litigation discussed below. The
Court also has entered an order that termination of certain named defendants from the Delaware action applies to
this action without further order of the Court. On February 26, 2009, the Court dismissed those AIG officer and
director defendants against whom the shareholder plaintiffs in the Delaware action had not pursued claims. It is
AIG’s position that the terms of the AIG/Greenberg MOU do not require dismissal of the derivative claims against
Greenberg, Smith and SICO in the New York 2004/2005 Derivative Litigation. The Starr Parties have taken the
opposite position.
Derivative Actions — Delaware Chancery Court. From October 2004 to April 2005, AIG shareholders filed five
derivative complaints in the Delaware Chancery Court. All of these derivative lawsuits were consolidated into a single
action as In re American International Group, Inc. Consolidated Derivative Litigation (the Delaware 2004/2005
Derivative Litigation). The amended consolidated complaint named 43 defendants (not including nominal defendant
AIG) who, as in the New York 2004/2005 Derivative Litigation, were current and former officers and directors of
AIG, as well as other entities and certain of their current and former employees and directors. The factual allegations,
legal claims and relief sought in this action are similar to those alleged in the New York 2004/2005 Derivative
Litigation, except that the claims are only under state law. In early 2007, the Court approved an agreement that AIG
be realigned as plaintiff, and, on June 13, 2007, acting on the direction of the Special Committee, AIG filed an
amended complaint against former directors and officers Maurice R. Greenberg and Howard I. Smith, alleging breach
of fiduciary duty and indemnification. Also on June 13, 2007, the Special Committee filed a motion to terminate the
litigation as to certain defendants, while taking no action as to others. Defendants Greenberg and Smith filed answers
to AIG’s complaint and brought third-party complaints against certain current and former AIG directors and officers,
PwC and Regulatory Insurance Services, Inc. On September 28, 2007, AIG and the shareholder plaintiffs filed a
combined amended complaint in which AIG continued to assert claims against defendants Greenberg and Smith and
took no position as to the claims asserted by the shareholder plaintiffs in the remainder of the combined amended
complaint. In that pleading, the shareholder plaintiffs are no longer pursuing claims against certain AIG officers and
directors. On February 12, 2008, the Court granted AIG’s motion to stay discovery pending the resolution of claims
against AIG in the New York consolidated securities action. On April 11, 2008, the shareholder plaintiffs filed the
First Amended Combined Complaint, which added claims against former AIG directors and officers Maurice
Greenberg, Edward Matthews, and Thomas Tizzio for breach of fiduciary duty based on alleged bid-rigging in the
municipal derivatives market. On June 13, 2008, certain defendants filed motions to dismiss the shareholder plaintiffs’
portions of the complaint. On February 10, 2009, the Court denied the motions to dismiss filed by Maurice Greenberg,
Edward Matthews, and Thomas Tizzio; granted the motion to dismiss filed by PwC without prejudice; and granted the
motion to dismiss filed by certain former employees of AIG without prejudice for lack of personal jurisdiction. On
March 6, 2009, the Court granted an Order of Dismissal, Notice and Order of Voluntary Dismissal and Stipulation
and Order of Dismissal to dismiss those individual defendants who were similarly situated to the individuals dismissed
by the Court for lack of personal jurisdiction. On March 12, 2009, Defendant Greenberg filed his verified answer to
AIG’s complaint; cross-claims against Marsh, ACE, General Re, and Thomas Tizzio; and a third-party complaint
AIG 2009 Form 10-K 300