[JURIST] A judge for the US District Court for the Southern District of New York [official website] gave final approval Friday to a $970.5 million settlement for shareholders of the insurance giant American International Group (AIG) to settle claims [NYT documents] that shareholders were misled about the subprime mortgage exposure that led to a liquidity crisis and over $180 billion in federal bailouts. In one of the largest class-action settlements to come out of the 2008 financial crisis, the judge noted that no potential class member objected to the terms of the deal, leading her to determine it was “fair, reasonable and adequate.” The settlement covers investors who bought AIG securities from March 16, 2006, to September 16, 2008. The investors accused AIG of failing to disclose risks it took on through its portfolio of credit default swaps and a securities lending program, leading them to buy stocks they otherwise would not have bought. A 2008 government rescue gave taxpayers an 80 percent stake in AIG. The government sold its stake for a positive return of $22.7 billion to the Treasury Department and the Federal Reserve [official websites].
AIG has been the subject of many lawsuits in recent years. In April 2013 the same court approved [JURIST report] a $115 million settlement between AIG shareholders and the company’s former CEO and other executives in order to resolve allegations that the insurer misled investors about financial records. In September 2010 a class-action case moved forward against former AIG chief executive Martin Sullivan, former executive for AIG’s subsidiary Joseph Cassano and multiple other former chief and senior executives among accusations of fraudulent intent to mislead the market [JURIST report] and failing to disclose to its shareholders the risks the company was taking in issuing sub-prime mortgages. In May 2010 the US Department of Justice [official website] decided not to file charges [JURIST report] against Cassano, ending a two-year criminal investigation of several executives from AIG’s Financial Products subsidiary, which played a large role in constructing complex contracts known as credit-default swaps [TIME backgrounder] that insured bond losses tied to the US housing market. The US Securities and Exchange Commission (SEC) [official website] investigation was undertaken to determine whether AIG officials deceived investors and auditors in 2007 by misrepresenting the accounting value of a credit default swap portfolio, which nearly bankrupted the company. In 2009, former AIG executives agreed to settle [JURIST report] a suit [complaint, PDF] brought by the SEC alleging their involvement in inflating the company’s reported financial records.