AIG 2010 Annual Report Download - page 332

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, pursuant to the AIG/Greenberg MOU:
• SICO agreed to undertake to dismiss with prejudice an action it brought against AIG in the Tribuna del
Circuito Civil, Panama City, Panama. On February 10, 2010, the parties filed a joint request to dismiss the
case. On March 2, 2010, the Court posted its approval of the dismissal of claims and the action was
terminated.
• AIG agreed to undertake to dismiss with prejudice its direct claims against Greenberg and Smith in the
Delaware 2004/2005 Derivative Litigation. On February 5, 2010, AIG, Greenberg and Smith submitted a
stipulation to the Court dismissing AIG’s direct claims against Greenberg and Smith.
The Starr Parties have taken the position that the AIG/Greenberg MOU also releases certain of the derivative
claims being pursued by the shareholder plaintiffs in the Delaware 2004/2005 Derivative Litigation and the New
York 2004/2005 Derivative Litigation. AIG has taken the opposite position. The Delaware 2004/2005 Derivative
Litigation and the New York 2004/2005 Derivative Litigation are described below under ‘‘Litigation Related to the
Matters Underlying the 2006 Regulatory Settlements.’’
2006 Regulatory Settlements and Related Regulatory Matters
2006 Regulatory Settlements. In February 2006, AIG reached a resolution of claims and matters under
investigation with the DOJ, the SEC, the Office of the New York Attorney General (NYAG) and the New York
State Department of Insurance (DOI). The settlements resolved investigations conducted by the SEC, NYAG and
DOI in connection with the accounting, financial reporting and insurance brokerage practices of AIG and its
subsidiaries, as well as claims relating to the underpayment of certain workers’ compensation premium taxes and
other assessments. These settlements did not, however, resolve investigations by regulators from other states into
insurance brokerage practices related to contingent commissions and other broker-related conduct, such as alleged
bid rigging. Nor did the settlements resolve any obligations that AIG may have to state guarantee funds in
connection with any of these matters.
As a result of these settlements, AIG made payments or placed amounts in escrow in 2006 totaling
approximately $1.64 billion, $225 million of which represented fines and penalties.
In addition to the escrowed funds, $800 million was deposited into, and subsequently disbursed by, a fund under
the supervision of the SEC, to resolve claims asserted against AIG by investors, including the securities class
action and shareholder lawsuits described below. Amounts held in escrow totaling approximately $338 million,
including interest thereon, (The Workers’ Compensation Fund), are included in Other assets at December 31,
2010, and are specifically designated to satisfy liabilities related to workers’ compensation premium reporting
issues.
Also, as part of the settlements, AIG agreed to retain, for a period of three years which has been extended
through June 30, 2011, an independent consultant to conduct a review that included, among other things, the
adequacy of AIG’s internal control over financial reporting, the policies, procedures and effectiveness of AIG’s
regulatory, compliance and legal functions and the remediation plan that AIG implemented as a result of its own
internal review.
Other Regulatory Settlements. AIG’s 2006 regulatory settlements with the SEC, DOJ, NYAG and DOI did not
resolve investigations by regulators from other states into insurance brokerage practices. AIG entered into
agreements effective in early 2008 with the Attorneys General of the States of Florida, Hawaii, Maryland,
Michigan, Oregon, Texas and West Virginia; the Commonwealths of Massachusetts and Pennsylvania; and the
District of Columbia; as well as the Florida Department of Financial Services and the Florida Office of Insurance
Regulation, relating to their respective industry-wide investigations into producer compensation and insurance
placement practices. The settlements called for total payments of $26 million by AIG, of which $4.4 million was
paid under previous settlement agreements. During the term of the settlement agreements, which run through
early 2018, AIG will continue to maintain certain producer compensation disclosure and ongoing compliance
initiatives. AIG will also continue to cooperate with the industry-wide investigations. On April 7, 2010, it was
announced that AIG and the Ohio Attorney General entered into a settlement agreement to resolve the Ohio
316 AIG 2010 Form 10-K