A.I.G. to Pay $725 Million in Ohio Case

July 16, 2010

A.I.G. to Pay $725 Million in Ohio Case

By MICHAEL POWELL and MARY WILLIAMS WALSH

The American International Group, once the nation’s largest insurance group before it nearly collapsed in 2008, has agreed to pay $725 million to three Ohio pension funds to settle six-year-old claims of accounting fraud, stock manipulation and bid-rigging.

Taken together with earlier settlements, A.I.G. will ladle out more than $1 billion to Ohio investors, money that will go to firefighters, teachers, librarians and other pensioners. The state’s attorney general, Richard Cordray, said Friday, that it was the 10th largest securities class-action settlement in United States history.

“No privileged few are entitled to play by different rules than the rest of us,” Mr. Cordray said during a news conference. “Ohio is determined to send a strong message to the marketplace that companies who don’t play by the rules will pay a steep price.”

A.I.G. disclosed the terms of the settlement in a filing with the Securities and Exchange Commission.

How A.I.G. will pay for this settlement is an open question. It has agreed to a two-step payment, in no small part to give it time to figure out how to raise the money.

Executives are well aware that taxpayers and legislators would cry foul if it paid the lawsuit with any portion of the $22 billion in federal rescue money still available from the United States Treasury.

Instead, the company intends to pay $175 million within 10 days of court approval of its settlement. It plans to raise $550 million through a stock offering in the spring of 2011. That prospect struck some market analysts as a long shot.

“There’s still a lot of question marks hanging over A.I.G.,” said Chris Whalen, a co-founder of Institutional Risk Analytics, a research firm. “How would you write a prospectus for it?

“The document,” he said, “would be quite appalling when it described the risks.”

A.I.G.’s former chief executive, Maurice R. Greenberg, and other executives agreed to pay $115 million in an earlier settlement with Ohio, which filed its lawsuit in 2004.

State attorneys general often have proved more aggressive than federal regulators in going after financial houses in the wake of the 2008 crisis. And A.I.G. could face new legal headaches. For instance New York’s attorney general, Andrew M. Cuomo, has stepped up his investigation of the company in the last few weeks, according to a person with direct knowledge of the case.

The Ohio settlement allows “A.I.G. to continue to focus its efforts on paying back taxpayers and restoring the value of our franchise,” Mark Herr, a company spokesman, said in a news release.

The Ohio case was filed on behalf of pension funds in the state that had suffered significant losses in their holdings of A.I.G. when its share price plummeted after it restated results for years before 2004. Those restatements followed an investigation by Eliot L. Spitzer, Mr. Cuomo’s predecessor, into accounting irregularities at the company and the subsequent resignation of Mr. Greenberg.

But the company faces a long and uncertain road, say Wall Street analysts.

Its stock, after adjusting for a reverse split, once traded at $1,446.80 a share; it stands now at $35.64.

A.I.G. has become the definition of turmoil. Its chairman resigned this week after a fierce feud with the chief executive, who has referred dismissively to “all those crazies down in Washington.”

Those crazies presumably include the federal government, which over the last two years gave A.I.G. the largest bailout in United States history, making $182 billion available to the company.

And the company’s proposed stock offering next year is rife with uncertainties. Such an offering would by definition dilute the value of the government’s holdings.

A.I.G. has struggled of late to sell off subsidiaries to repay the Federal Reserve Bank of New York. This year the company failed in its attempts to turn its Asian life insurance subsidiary over to Prudential of Britain. This week the company’s directors voted to proceed with an initial public offering of the same subsidiary, with the proceeds intended for the Federal Reserve.

Should the company fail to raise the $550 million, Ohio has the right to resume its litigation.

The fall of the world’s largest insurance company began in the autumn of 2008, when a sudden downgrade in its credit worthiness set off something like a bank run. It turned out that the company had sold questionable derivatives that were used to prop up the portfolios of other financial institutions.

Federal officials moved quickly to bail out the company, fearing that if A.I.G. toppled, dozens of financial institutions would quickly fall as well. Havoc seemed in the offing.

Federal investigators have since examined many aspects of the company’s behavior, even convening a grand jury in New York. But they have never brought charges against the company or its top officials.

“The states are too often the only ones to watch out for this misconduct,” Mr. Cordray said Friday. “For years, people have been asleep at the switch.”

Louise Story contributed reporting.

This article has been revised to reflect the following correction:

Correction: July 17, 2010

An earlier version of this article misidentified the New York attorney general who began the investigation into A.I.G.’s accounting irregularities. It was Eliot L. Spitzer, not Andrew M. Cuomo.

5 Responses

  1. […] « A.I.G. to Pay $725 Million in Ohio Case CA BANKRUPTCY CT HOLDS THAT MERS CANNOT ASSIGN » […]

  2. I started this whole process with the Attorney General to have a public timeline to clearly show our efforts at good faith dealing. The AG referred us to a HUD counselor to help with our issues. Our servicer works with this orginization and contractually cannot proceed to court until all alternitives can be explored. This allowed us another year to “see the light”.

    I am going to challenge this lawsuit. If we lose we will appeal. I am going to stand up for the next guy in line. If we win there wil be a case in our state for all the rest to show the Judge. If we lose we tried and my kids are watching me try.

    Thanks to Mr Garfield and many other crusaders
    teaching me about securitized mortgages and the law behind these defenses I was able to
    find an Attorney who thanked me for bringing him the”best Forelosure defense case he and his colleagues have seen” , who is charging a very small monthly fee I can afford and still considering a contingency fee! I am the perfect client that has nothing to lose and a chance to stand up to the banks for the benefit of America.
    United we stand!

  3. trespass unwanted

    I am meek. But stand prepared to fight !

  4. A fraud foreclosure is void ab initio.

    If I commit a fraud foreclosure on you, will you let me have your home?

    I don’t give legal advice because I don’t know legal things.

    If you believe the fraud sale is a real sale, then everything done after that you will believe is real, also.

    But ask yourself, if something has it’s beginning in fraud, is there any way to ‘clean it up’ so it is not fraud?

    You have to know how to see the world. What’s going on is the universe waking us up to whether we can ‘see’ what’s going on.

    If I tell you the grass is red, and sue you so you will know grass is red, will you fight that lawsuit and try to convince a judge grass is green?

    Well a fraud foreclosure sale is no different, yet when one happens we feel so ‘defeated’ by what we know is wrong!

    Why won’t anyone help you? Because now is the time, that we realize who we are and help ourselves. It’s really as simple as standing up and saying, this is ‘not true’.

    But the masses get on these boards and say what happened was real, and we follow and not lead, and we say, OMG, it happened to me too!

    What happened? Something real?

    Next step is probably getting a letter telling you, you are in someone’s property and you have three days to respond to their ‘internal case’ on what you want to do, or get out.

    Now why get you to respond to their ‘internal case number”?

    So you’d reveal how you plan to ‘fight’ them.
    If you have to fight your case may be weak.
    There are no enemies among us.

    If you don’t respond and give them the info they seek ‘internally’ they will have already filed an unlawful or forcible detainer lawsuit.

    It will be served by a constable.

    You will be called a name, (bearing false witness against you)
    You will be told the court has jurisdiction to hear the case; does it?
    Have you even learned what jurisdiction means? Do you accept their statement as fact?

    You will read a reason they say you should be evicted.
    Do you care what they say? Or do you know the truth.

    If you are served with one of those, and you believe a fraud foreclosure sale is a real sale, what will you do; what will you say.

    If you ‘know’ that fraud was involved, are you going to let the court decide the case? I mean, is there really anything to decide?

    Let’s see, the court can side with the one bringing the suit, by not knowing fraud was involved because you choose to ‘fight’ the other things they say.

    You can open the court’s eyes by telling the court, the eviction suit is fraud if it’s based on a fraud foreclosure sale.

    No attorney can help you fix everything you created.
    By our signature these documents were created.
    Read it, read it again, and again and again.

    If you know someone violated provisions in your ‘trust’ then you haven’t nothing to fear but fear itself.

    Stand up and say what you know and don’t get caught in their lies.
    Normally you’d rebut their compliant point-for-point, but that’s their rule for their game.

    Your rule is you will tell them, their lawsuit is based on fraud.
    How hard is that, is there a fight to tell that ‘truth’?

    The bible said ‘The meek shall inherit the Earth’. Earth comprises of land ownership, land ownership has home ownership.

    The prophecy came true and the bankers didn’t realized they helped it come true.

    Now “meek”…don’t just give it back to them.
    Don’t be afraid, their power is only on paper.
    Will the paper that shows the fraud be able to defeat live men and women. Children of the Creator of God.
    We fight against paper, is that a ‘real enemy’?
    Stand up and know where the problem is, and figure out,
    without looking at t.v.; figure out how to reveal the lie of the paper
    and bring it to light.

    Tell the judge whether they have jurisdiction to decide a fraud case in the favor of a person who committed the fraud.

    Legal dictionary is very important.
    Paper that can defeat paper. It’s a war of words.
    Words they lie, and words you use to defeat that lie.

    Stop acting like people have power, when they stand behind paper to do their dirty deeds. White collar criminal commits theft without a gun! A weapon is an automatic felony.

    There should be an automatic felony based on the value of the property almost stolen.

    If you move out defeated, realize, this world knows, that by your free will you created the document; by your free will you don’t know what can and can’t be done with your trust; and by your free will you’ll move out of your home and ‘give’ it away, because you did not stand up and tell people whether they had a right to your property, so you let them have it because you were afraid to stand up or you didn’t want to spend the time to find out or to tell them why they ‘can’t have it’!

    Some will hear and not understand, some will hear and understand for a while and forget, and some will hear and understand.

    To everyone, I love you, no matter what way you decide to go.
    My attorney general sat back and did nothing when I filed a fraud complaint. They are slow to move, but each step of the way, I realized the one who got me into this is the one who will get me out of this.
    Love is what makes the world go around.

    The meek has inherited the Earth. Being meek, we will hand it back, because we haven’t learned how to stand up for ourselves and know what we ‘created’, and know what rights we have, and know what others can and can’t do with our documents we created.

    Our documents
    We created

  5. I have had an open case of Fraud complaints with the Ohio AG since 10/08…these fraudsters are so arrogant they foreclosed on us anyway! Richard Cordray you have my vote in November you ROCK!

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