Florida pension fund sues AIG

A Florida pension fund yesterday filed suit against American International Group Inc. of New York, accusing the company and four executives of making misleading statements about the company’s finances. The Jacksonville (Fla.) Police and Fire Pension Fund filed suit in U.S. district court in Manhattan, alleging that the company and some of its officers and directors made a series of false and misleading statements that artificially raised the price of AIG securities. Among the accused executives, there is Martin J. Sullivan, chief executive; Steven Bensinger, vice chairman, Financial Services,; Joseph Cassano, ex-head of AIG’s American International Group Financial Products; and Robert Lewis, senior vice president and chief risk officer. From last May to this May, the insurer suffered losses on products related to the residential mortgage market, while assuring investors that the company’s “super senior” credit default swap was shielded from the mortgage meltdown that rocked the rest of the financial sector. Investors were falsely reassured of the safety behind the CDS portfolio during a conference call last August. “We see no dollar of loss associated with any of that [credit default swap] business,” said Mr. Cassano, at the conference call. “Any reasonable scenario that anyone can draw, and when I say reasonable, I mean a severe recession scenario that you can draw out for the life of those securities.” But the truth began to seep out this February, when PricewaterhouseCoopers LLC of New York revealed that the company had problems with its internal control over financial reporting, and with the oversight related to the fair value valuation of the CDS portfolio. The plaintiffs, represented by New York-based Bernstein Litowitz Berger & Grossmann LLP, seek class action status.