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CHICAGO Oct 3 PricewaterhouseCoopers, the
independent auditor for American International Group (AIG.N),
will pay $97.5 million to settle a class-action securities
fraud lawsuit against the insurance giant and others, the Ohio
state attorney general's office said on Friday.
The settlement is subject to approval by the U.S. District
Court for the Southern District of New York, according to Chris
Geidner, Ohio's principal assistant attorney general. The court
may take the matter up in January 2009, Geidner said.
The suit was filed initially in 2004 and expanded in 2005,
years before last month's U.S. government bailout of AIG, one
of the key chapters in the continuing saga of the U.S.
The settlement with PricewaterhouseCoopers [PWC.UL] is
"only a small part" of the larger case against main defendants
AIG and its former Chief Executive Officer Hank Greenberg, said
Geidner. Another defendant is General Re Corp, a unit of
Berkshire Hathaway Inc (BRKa.N).
Warren Buffett, chairman and CEO of Berkshire Hathaway,
said last week the conglomerate may buy AIG assets.
The district court has yet to rule on a motion to dismiss
General Re from the suit.
Ohio sued AIG and the others in 2004 on behalf of three
Ohio pension funds. The three funds are the lead plaintiffs in
an action that includes all AIG shareholders from October 1999
to April 2005. The plaintiffs claim that AIG misstatements
inflated the company's stock price and when the truth became
known, AIG's share price plunged, said Geidner.
The suit was filed in 2004 after New York's attorney
general at the time, Eliot Spitzer, investigated claims of
illegal bid-rigging and other improprieties in the insurance
In 2005, the suit was expanded to include claims of
improper use of "finite" reinsurance by AIG, done in part as a
way to inflate AIG's earnings.
"AIG's improper accounting for reinsurance and other
transactions... led to the company's $3.9 billion restatement
or adjustment of earnings in May 2005," said a statement issued
Friday by the Ohio attorney general's office.
Geidner said settling with the auditor in a fraud case like
this goes against normal practice. Usually, when the principal
named company or individual in such a case settles, the auditor
then settles for about 5 to 10 percent.
Geidner said he could not say whether the $97.5 million
settlement is a guide to how much AIG and the other plaintiffs
may eventually settle for, if they do settle.
Plaintiffs claim that shareholders lost $9 billion over the
course of six different price drops linked to the overstated
AIG earnings, Geidner said.
"We are pleased with this milestone and will continue to
vigorously pursue investors' claims against the remaining
defendants in the case," Geidner said in a statement issued on
The three pension funds are the Ohio Public Employees
Retirement System, State Teachers Retirement System and the
Ohio Police & Fire Pension Fund.
(Reporting by Karen Pierog in Chicago and Bernie Woodall in
Los Angeles; Editing by Tim Dobbyn)