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From Securities Regulation Daily, March 20, 2015

AIG to pay over $960 million to end class suit

By Mark S. Nelson, J.D.

A federal judge in Manhattan approved a more than $960 million securities class action settlement in a case brought by several public pension funds and others against American International Group, Inc. for its use of high risk derivatives to backstop its subprime mortgage business ahead of the 2008 financial crisis.  AIG and federal regulators also had drawn public criticism for the aid package AIG received from the federal government during the crisis (and paid back in 2013) in order to prevent its collapse from having an even greater impact on financial markets (In re American International Group, Inc. 2008 Securities Litigation, March 20, 2015, Swain, L.).

According to the settlement preliminarily approved by U.S. District Judge Laura Taylor Swain last October, the settlement class will consist of all persons who bought AIG securities on U.S. public exchanges or who bought/acquired AIG securities in a manner traceable to a public offering, provided the transactions occurred within the class period. Judge Swain said in an order issued late this afternoon that the proposed settlement was fair and reasonable, and that its plan of allocation rationally tracked movements in AIG’s securities during the class period.

A group of pension funds were among those who initially filed suit against AIG in May 2008. AIG’s most recent Form 10-K, filed in February, describes how the case was eventually narrowed in its scope over time. The crux of the complaint was that AIG misled investors about the risks involved in its operations in press releases, public filings, and in conference calls. The plaintiffs focused on alleged violations of the Exchange Act’s and Securities Act’s antifraud and controlling persons provisions. Anyone who planned to opt out of the settlement had until this past January to do so.

Judge Swain previously said she would decide today on whether to give her final approval to the proposed settlement. But even before today’s scheduled hearing, AIG had deposited $960 million into an escrow account in the event the settlement was finally approved. No funds can be distributed, however, until Judge Swain’s order becomes final and the time for appellate review has lapsed.

The case is No. 08-cv-04772.

Attorneys: David Robertson Hassel (Bernstein Litowitz Berger & Grossmann LLP) for Jacksonville Police and Fire Pension Fund. Cynthia A. Hanawalt (Bleichmar Fonti Tountas & Auld LLP) for Ontario Teachers' Pension Plan Board. E. Powell Miller (The Miller Law Firm, P.C.) for Port Authority of Allegheny County Retirement and Disability Allowance Plan for Employees Represented by Local 85 of the Amalgamated Transit Union. Atara Hirsch (Abraham, Frutcher & Twersky, LLP) for D. E. Shaw Oculus Portfolios, L.L.C. Joseph S. Allerhand (Weil, Gotshal & Manges LLP) and James Anthony Diehl (Akin Gump Strauss Hauer & Feld LLP) for American International Group, Inc.

Companies: American International Group, Inc.; Jacksonville Police and Fire Pension Fund; Ontario Teachers' Pension Plan Board; Port Authority of Allegheny County Retirement and Disability Allowance Plan for Employees Represented by Local 85 of the Amalgamated Transit Union; D. E. Shaw Oculus Portfolios, L.L.C.

MainStory: TopStory NewYorkNews CorporateGovernance Derivatives DirectorsOfficers FraudManipulation SecuritiesOfferings RiskManagement

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