AIG 2015 Annual Report Download - page 307

ITEM 8 / NOTE 15. CONTINGENCIES, COMMITMENTS AND GUARANTEES
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AIG believes that any indemnification obligation would arise only if: (a) SICO prevails on its appeal and ultimately receives an
award of damages; (b) the United States then commences an action against AIG seeking indemnification; and (c) the United
States is successful in such an action through any appellate process. If SICO prevails on its claims and the United States
seeks indemnification from AIG, AIG intends to assert defenses thereto. A reversal of the Court of Federal Claim’s June 17,
2015 decision and judgment and a final determination that the United States is liable for damages, together with a final
determination that AIG is obligated to indemnify the United States for any such damages, could have a material adverse effect
on our business, consolidated financial condition and results of operations.
False Claims Act Complaint
On February 25, 2010, a complaint was filed in the United States District Court for the Southern District of California by two
individuals (Relators) seeking to assert claims on behalf of the United States against AIG and certain other defendants,
including Goldman Sachs and Deutsche Bank, under the False Claims Act. Relators filed a first amended complaint on
September 30, 2010, adding certain additional defendants, including Bank of America and Société Générale. The first
amended complaint alleged that defendants engaged in fraudulent business practices in respect of their activities in the over-
the-counter market for collateralized debt obligations, and submitted false claims to the United States in connection with the
FRBNY Credit Facility and Maiden Lane II LLC and Maiden Lane III LLC entities (the Maiden Lane Interests) through, among
other things, misrepresenting AIG’s ability and intent to repay amounts drawn on the FRBNY Credit Facility, and
misrepresenting the value of the securities that the Maiden Lane Interests acquired from AIG and certain of its counterparties.
The first amended complaint sought unspecified damages pursuant to the False Claims Act in the amount of three times the
damages allegedly sustained by the United States as well as interest, attorneys’ fees, costs and expenses. The complaint and
the first amended complaint were initially filed and maintained under seal while the United States considered whether to
intervene in the action. On or about April 28, 2011, after the United States declined to intervene, the District Court lifted the
seal, and Relators served the first amended complaint on AIG on July 11, 2011. On April 19, 2013, the Court granted AIG’s
motion to dismiss, dismissing the first amended complaint in its entirety, without prejudice, giving the Relators the opportunity
to file a second amended complaint. On May 24, 2013, the Relators filed a second amended complaint, which attempted to
plead the same claims as the prior complaints and did not specify an amount of alleged damages. AIG and its co-defendants
filed motions to dismiss the second amended complaint on August 9, 2013. On March 29, 2014, the Court dismissed the
second amended complaint with prejudice. On April 30, 2014, the Relators filed a Notice of Appeal to the Ninth Circuit. We are
unable to reasonably estimate the possible loss or range of losses, if any, arising from this litigation.
Litigation Matters Relating to AIG’s Insurance Operations
Caremark. AIG and certain of its subsidiaries have been named defendants in two putative class actions in state court in
Alabama that arise out of the 1999 settlement of class and derivative litigation involving Caremark Rx, Inc. (Caremark). The
plaintiffs in the second-filed action intervened in the first-filed action, and the second-filed action was dismissed. An excess
policy issued by a subsidiary of AIG with respect to the 1999 litigation was expressly stated to be without limit of liability. In the
current actions, plaintiffs allege that the judge approving the 1999 settlement was misled as to the extent of available insurance
coverage and would not have approved the settlement had he known of the existence and/or unlimited nature of the excess
policy. They further allege that AIG, its subsidiaries, and Caremark are liable for fraud and suppression for misrepresenting
and/or concealing the nature and extent of coverage.
The complaints filed by the plaintiffs and the intervenors request compensatory damages for the 1999 class in the amount of
$3.2 billion, plus punitive damages. Plaintiffs have now reduced the amount of compensatory damages they are seeking at trial
to $1.1 billion. AIG and its subsidiaries deny the allegations of fraud and suppression, assert that information concerning the
excess policy was publicly disclosed months prior to the approval of the settlement, that the claims are barred by the statute of
limitations, and that the statute cannot be tolled in light of the public disclosure of the excess coverage. The plaintiffs and
intervenors, in turn, have asserted that the disclosure was insufficient to inform them of the nature of the coverage and did not
start the running of the statute of limitations.
On August 15, 2012, the trial court entered an order granting plaintiffs’ motion for class certification, and on September 12,
2014, the Alabama Supreme Court affirmed that order. AIG and the other defendants’ petition for rehearing of that decision