New Orleans Employees Retirement System filed a lawsuit Wednesday against executives and directors of American International Group Inc., confirmed Jerry Davis, chairman of the $355 million funds board of trustees.
The suit, filed in Delaware Chancery Court in Wilmington, claims AIGs senior management and directors did not properly monitor the risk of losses in the subprime market.
Instead of controlling and monitoring AIGs staggering risk associated with its dangerous exposure to the housing bubble, the individual defendants utterly failed to monitor the companys operations, the lawsuit said.
The Federal Reserve announced Tuesday that it would provide AIG with an $85 billion loan for a 79.9% equity stake. It also replaced the companys management.
This claim follows a similar suit the system filed in 2005 against AIG when Maurice Hank Greenberg was CEO, Mr. Davis said. The replacements (for Mr. Greenberg) have shown a level of carelessness that has put the company in the position it is today, he said. That suit is still pending.
Mr. Davis estimated losses of $200,000 to $300,000 for the fund from AIG holdings, but he said the lawsuit was more about the breach of fiduciary duty by AIGs management.
Joe Norton, a spokesman for AIG, did not return a call seeking comment by press time.