* Suit says AIG suffered more than $350 mln in damages
* AIG says suit is start of campaign to recover billions
* Campaign could also take aim at Bank of America, Goldman
(Adds comments in paragraphs five-six, 13, 16-18)
By Tom Hals
WILMINGTON, Del., April 28 American
International Group Inc (AIG.N) launched a fight to recoup
billions of dollars the bailed-out insurer said it lost due to
fraud, setting up a clash with Wall Street's biggest banks.
The insurer, 92 percent-owned by the U.S. government,
joined the swelling ranks of investors and insurers who are
taking legal action over supposedly safe mortgage-related
investments at the heart of the 2008 financial crisis.
The insurance giant sued two money managers in New York
State Supreme Court on Thursday, but AIG will likely take aim
at Bank of America Corp (BAC.N), Goldman Sachs Group Inc (GS.N)
and others, according to a person familiar with AIG's
The company that was once vilified for shoddy risk
management that led to $182 billion taxpayer bail-out, could
now be trying to recast itself as the victim.
"I think the more that comes out about the crisis the more
they have been revealed to be a victim, or even a patsy," said
Isaac Gradman, an attorney who runs the Subprime Shakeout blog
and who has brought similar lawsuits.
"It's a very serious effort to recoup losses. They have
hired one of the best law firms in country for this type of
litigation," Gradman said.
The complaint was filed by Quinn Emanuel Urquhart &
Sullivan LLP. It was brought by AIG's Financial Products unit
as part of the insurer's "overall efforts to recoup potentially
billions of dollars from the fraudulent conduct of these
defendants and other parties," the complaint said.
The lawsuit against ICP Asset Management and Moore Capital
contended that AIG suffered losses by insuring mortgage
securities that one of the financial firms created.
ICP could not be immediately reached for comment. A Moore
spokesman said in a statement: "We haven't seen the complaint,
and therefore can't comment on it."
Goldman Sachs and Bank of America declined to comment.
AIG could be taking aim at smaller firms before taking on
the more formidable opponents.
"If the suit does well, that might put some pressure on
Goldman and Bank of America to make some kind of arrangement to
avoid a suit," said Robert Hockett, a law professor at Cornell
University and an expert in banking regulation.
Investors, bond insurers and federal home loan banks have
already sought tens of billions of dollars from the banks for
misrepresenting the quality of the home loans that were
packaged into bonds known as mortgage-backed securities.
While none of the lawsuits has gone to trial, Bank of
America recently reached a $1.6 billion settlement with Assured
Guaranty Ltd (AGO.N), which insured mortgage bonds. Some
financial and legal analysts said that deal showed the legal
claims posed a real risk to the banks. [ID:nN15102036]
Legal experts said it might be three years or more before
AIG began to see any money from the legal fight, but many said
the cases seem to have strong claims.
Jack Williams, a professor at Georgia State University
College of Law, said that recent changes that raised standards
for bringing securities cases meant many of the lawsuits were
well researched before they were filed.
"I think that we'll see facts develop over time that will
show stronger and stronger support for the allegations made,"
said Williams, adding that the cases could lead to a broad
settlement so costly that it could require the involvement of
the federal government.
DAMAGES OF $350 MILLION ALLEGED
A big profit from the AIG rescue and the government's
eventual disentanglement ahead of U.S. elections in 2012 would
be a boost for the Obama administration, coming on the heels of
successes at Citigroup Inc (C.N) and General Motors Co (GM.N).
A U.S. Treasury spokesman it was not involved in the
decision to sue the money managers.
Thursday's lawsuit said the defendants breached obligations
to AIG related to the creation of complex collateralized debt
obligations, or CDOs.
AIG said it has suffered more than $350 million in damages
from the alleged misconduct, which included using inflated
values on the mortgage bonds that were packaged into the CDOs.
By inflating the values, ICP created windfall profits for
itself and swelled its management fees, the lawsuit argues.
The complaint draws on last year's SEC lawsuit against ICP
in Manhattan federal court, accusing the investment advisory
firm of repeatedly violating federal securities laws.
The AIG case is AIG Financial Products v ICP Asset
Management LLC et al, Supreme Court of New York, New York
County, No. 651117/2011.
(Additional reporting by Martha Graybow, Noeleen Walder,
Rachelle Younglai and Joseph Ax; Editing by Howard Goller,
Gerald E. McCormick and Ted Kerr)