Maurice R. Greenberg, American International Group Inc.'s former chief, and five other defendants will pay $115 million to settle a shareholder lawsuit filed on behalf of several Ohio state pension funds including the $69.6 billion Ohio Public Employees Retirement System, the $62.9 billion State Teachers Retirement System of Ohio and the $10.7 billion Ohio Police & Fire Pension Fund.
The suit charges that the funds lost money on their investments in AIG due to alleged accounting fraud and anti-competitive practices at the New York-based insurer and AIG's restatement of its 2005 results. The suit, which is currently the subject of a hearing in New York over its class action status, will continue against AIG.
The settlement agreement, which is subject to approval by federal court and the boards of the pension funds, includes three other former AIG executives — Howard I. Smith, Christian M. Milton and Michael J. Castelli — as well as C.V. Starr & Co. Inc. and Starr International Co. Inc., former AIG affiliates that are associated with Mr. Greenberg.
It is unclear whether the cost of the settlement will be covered by directors and officers liability insurance. Coverage for the defendants under an AIG policy issued by Great American Insurance Co. is currently being contested in court, according to documents filed in U.S. District Court for Southern District of New York on May 18.
Mr. Greenberg left AIG in 2005 amid investigations into the New York-based insurer's accounting practices.
Last week, Messrs. Greenberg and Smith, AIG's former chief financial officer, reached an agreement to settle accusations by the U.S. Securities and Exchange Commission that they had altered AIG's financial records from 2000 to 2005 to inflate the insurer's earnings.
Colleen McCarthy is an associate editor at Business Insurance, a sister publication of Pensions & Investments
