Liberty Mutual’s Ohio Casualty and Safeco units filed court papers to a proposed settlement of the class action suit pending against AIG. In January, AIG agreed to pay seven insurers $450 million to settle a long-running case over an alleged $1 billion workers' compensation under-reporting scheme. ACE INA Holdings, Auto-Owners Insurance Co., Companion Property & Casualty Insurance Co., FirstComp Insurance Co., The Hartford Financial Services Group, Technology Insurance Co. and Travelers Indemnity Co. will receive the settlement.
At the time, Liberty Mutual did not back the settlement, and said “the settlement is ‘an act of self-interest and is detrimental to the 600-member class’ because it ignores evidence of underreporting that occurred during the lawsuit. ‘The current discovery process, which will be substantially complete within the next 60 to 90 days, should be allowed to proceed uninterrupted so AIG is held to account for the true extent of its underreporting.’”
AIG spokesperson Mark Herr responded at the time by saying “It is unfortunate that Liberty is refusing to participate in this fair and reasonable settlement. As the seven other settling insurers have recognized in seeking to intervene in the action, Liberty's preference to continue litigating is not in the best interests of the class members."
On the other side of the table, AIG has brought a $350-million suit against money managers ICP Asset Management and Moore Capital Management to recoup “potentially billions of dollars from the fraudulent conduct of these defendants and other parties,” according to court papers.
According to the papers filed in the New York Supreme Court, the action arises from the “wrongful self-dealing” of ICP and affiliated entities that “victimized” AIG and taxpayers. AIG claims it suffered losses insuring mortgage securities created by ICP and ICP manipulated those securities in a way that benefited itself and Moore Capital.
The Wall Street Journal reports that the suit is similar to a June 2010 civil lawsuit the Securities and Exchange Commission (SEC) filed against ICP, affiliates of the firm and its chief executive, Thomas Priore, for securities fraud. ICP has denied the SEC’s allegations that ICP breached their fiduciary duty as investment advisers by favoring some clients over others in a series of mortgage-bond trades conducted when markets were in turmoil in 2007 and 2008.
WSJ also reports that Moore isn't identified in the SEC suit, but was later identified as one of the preferred clients in the complaint. Moore Capital’s spokesman said, "as described in the SEC complaint, ICP had discretionary authority to invest on behalf of the managed account without seeking Moore's consent," adding that "the account incurred more than $200 million in losses."
This could be the first of many suits AIG will file against Wall Street firms.
Created by company and the government to house toxic assets, the inner workings of Maiden Lane III were revealed in a filing with the Securities and Exchange Commission. The list of counterparties included both U.S.-based banks such as Goldman Sachs Group Inc. and Merrill Lynch, as well as foreign-domiciled firms including UBS, Deutsche Bank and Societe Generale.
