Following on last week's generally positive press that American International Group Inc. has a plan in place to pay back the government and recapitalize in the wake of the financial crisis, the insurer's also well publicized legal troubles have risen to the fore.
AIG's settlement of a shareholder lawsuit will reportedly go forward now after the company's insurers consented to fund the $90 million pact, according to Bloomberg.
Investors filed the derivative suit—“American International Group Inc. Consolidated Derivative Litigation, CA769-VCS, Delaware Chancery Court (Wilmington)”—against executives and directors on behalf of the insurer. The report said that in July, AIG paid $725 million to investors who lost money when the company’s stock plummeted amid a 2004 investigation into bid rigging and faulty accounting, for which former Chairman and CEO Maurice Greenberg is still embroiled in a legal battle.
According to Bloomberg, Felipe Arroyo, a lawyer representing AIG shareholders in the case, sent a letter to U.S. District Judge Denise Cote in New York today that said the settlement announced in August was dependent on insurance funding.
“The August 25 agreement was conditioned on funding by the directors and officers insurance carriers,” according to the letter. As of December 8, those insurers “have funded the agreed-upon settlement amount of $90 million into an escrow account,” Arroyo wrote.
A final settlement hearing is scheduled for January 18 in Delaware Chancery Court, according to the letter.
The money will be paid to AIG and not investors, the report says, while another $60 million will go to Greenberg and former AIG Vice Chairman Howard Smith to reimburse their legal fees, according to an AIG regulatory filing.
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Corrected December 14, 2010 at 1:43PM: yes