Class Action Settlements: AIG Securities
American International Group (AIG) is one of the largest international insurance organizations with branches and business in more than 130 countries. AIG's entities serve commercial, institutional as well as individual consumers in providing property casualty, life insurance and retirement services.
AIG has been involved in a number of class action suits in recent years. On October 29, 2004, a class action suit was brought on behalf of all persons who purchased AIG securities between October 28, 1999, and October 13, 2004. The suit alleged that AIG violated the Securities Exchange Act of 1934 in its failure to disclose certain adverse facts and misrepresented others. It also alleged that AIG engaged in bid rigging to provide brokers with artificial quotes and overstated and inflated its earnings and income in an attempt to guarantee itself substantial business.
A similar class action suit was brought on May 23, 2005, on behalf of those who purchased securities between October 31, 1999, and March 30, 2005. After New York Attorney General Eliot Spitzer and the U.S. Securities and Exchange Commission (SEC) issued subpoenas to AIG executives, AIG stock plummeted 30 percent, costing investors millions.
On May 23, 2008, the Jacksonville Police and Fire Pension Fund brought a class action against the insurance group alleging that it violated securities law by misrepresenting its exposure in the subprime mortgage fiasco. AIG had lost approximately $11 billion on credit default swaps linked to mortgages. The losses led to the pension fund losing between $700,000 and $800,000 of its $1 billion value.
A Canadian class action was brought in November 2008 under Ontario’s Securities Act on behalf of investors who had purchased AIG securities and who suffered massive losses as a result of AIG’s losses in the credit default swap transactions.
AIG was famously bailed out after the U.S. government took over the company on September 16, 2008. The Federal Reserve System lent the company up to $182 billion over a two-year period in return for a 79.9 percent equity stake secured by AIG’s assets, which included its very lucrative insurance business.
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