Shareholders American International
Group (AIG), which is almost 80% owned by the US government, may
soon be asked to cough up more money following its settlement of a
$725m securities class action with Ohio attorney general Richard
Cordray.
Under the settlement, AIG has
agreed to make an initial payment of $175m after entry of a court
order granting preliminary approval of the settlement with the
remaining $550m to be funded by AIG through one or more ordinary
share offerings.
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If AIG does not fund the $550m
before court approval of the settlement, the plaintiffs may
terminate the agreement, elect to acquire shares of AIG with a
market value of $550m or extend the period for AIG to complete a
share offering.
Three Ohio public pension funds
represented by Cordray led the class action suit. The funds were
the Ohio Public Employees Retirement System, the State Teachers
Retirement System of Ohio and the Ohio Police and Fire Pension
Fund.
Cordray noted that the class action
related to three illegal acts that resulted in AIG’s share price
falling significantly. These were:
The settlement, said Cordray,
formed part of the total case involving AIG, the three Ohio pension
funds and his office, which previously announced a $72m settlement
with General Reinsurance Corporation, a $97.5m settlement with
auditors PricewaterhouseCoopers and an $115m settlement with former
AIG CEO Maurice Greenberg and three other AIG executives and two
related corporate entities.
Cordray said that in total the
recovery for AIG shareholders in the case is expected to be just
over $1bn.
This makes it the 10th-largest securities class action
settlement in US history and the first and only billion-dollar
class action settlement since the financial crisis began to unfold
in 2008.
