Former AIG execs to pay $115M to settle bid rigging and fraud charges

The state of Ohio yesterday reached a $115 million settlement with ex-AIG chief executive Maurice R. “Hank” Greenberg and a handful of former AIG executives in a suit that alleged bid rigging and accounting fraud. In 2004, state attorney general Richard Cordray filed suit against American International Group Inc. of New York and a handful of former executives on the behalf of three state pension funds, the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio and Ohio Police and Fire Pension Fund. The suit sought damages for investors who bought AIG securities between Oct. 28, 1999 and April 1, 2005. The suit alleged that the carrier and its executives participated in anti-competitive practices, including the use of undisclosed contingent commissions and bid rigging, in addition to a fraudulent accounting scheme that later resulted in AIG's $3.9 billion restatement of its financial statements. Mr. Greenberg, ex-finance chief Howard I. Smith, former reinsurance executive Christian M. Milton and ex-controller Michael J. Castelli, as well as related entities C.V. Starr & Co. Inc. in New York and Starr International Co. Inc. in Hamilton, Bermuda, will settle with the pension funds. Counting a $97.5 million settlement with PricewaterhouseCoopers LLP in New York and a $72 million settlement with General Reinsurance Corp. of Stamford, Conn. — both involved in the AIG case — Mr. Cordray managed to get some $284.5 million from secondary defendants in the case. The attorney general's office is still preparing the case for trial against primary defendant AIG. "AIG has already paid $800 million to investors, including those that are part of the alleged class in this lawsuit -- an amount which is almost three times what all the other defendants have agreed to pay combined," said AIG spokeswoman Christina Pretto. "Any additional payments from AIG would not only come at the expense of taxpayers, but would greatly benefit the plaintiffs' lawyers who are litigating these claims and who would undoubtedly seek millions in fees from any judgment or settlement," she said.