AIG group tags US$126 million to legal settlement

The legal settlement deal which American International Group (AIG) recently announced that it had struck in principle with the Securities Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) will cost the company’s shareholders about US$126 million, according to a company statement. The settlement, which AIG stresses does not admit or deny any wrongdoing by the company, involves both the parent operation and subsidiary AIG Financial Products Corp. (AIGFP), and pertains to "certain structured transactions" that had taken place between Brightpoint, Inc. and The PNC Financial Services Group, Inc.Under the settlement, AIG will pay into a SEC "disgorgement fund" about US$46 million in fees (plus interest) relating to transactions with PNC. AIGFP will pay a penalty of a further US$80 million to the DOJ. While the deal will provide AIG and AIGFP with protection against future prosecutions relating to the PNC and Brightpoint transactions, it also requires an independent consultant (as mutually agreed upon) to be appointed the task of reviewing certain transactions entered into between AIG between the years 2000-2004. The purpose is to "determine whether the transactions were used by a counter-party to violate GAAP [general accounting and auditing practices] or obtain a specified accounting or reporting result". AIG’s chairman Maurice Greenberg comments, "this proposed settlement will be comprehensive and bring finality to the claims raised by the SEC and the DOJ. It is in the best interest of our shareholders, customers and employees to reach this settlement."