PricewaterhouseCoopers has agreed to pay $97.5 million as a partial settlement of a securities class-action lawsuit over the firm's audits of AIG, the insurance giant recently taken over by the federal government.
The Ohio Attorney General's Office announced the settlement after prosecuting the case on behalf of three named plaintiffs—the Ohio Public Employees Retirement System, State Teachers Retirement System and Ohio Police & Fire Pension Fund—that were seeking damages for investors who purchased AIG securities between Oct. 28, 1999, and April 1, 2005. Representing the plaintiffs and the Ohio Attorney General's Office were two law firms: Labaton Sucharow LLP of New York City, and Hahn Loeser & Parks LLP, which has offices in Cleveland and Columbus.
The class-action complaint alleged that PricewaterhouseCoopers violated the securities laws by issuing unqualified audit opinions on American International Group's financial statements during the years at issue in the case. PwC did not respond to a request for comment.
The plaintiffs also claimed that AIG improperly accounted for reinsurance and other transactions that led to the company's $3.9 billion restatement in May 2005. Those accounting problems led to the ouster of AIG's then-chairman and CEO, Maurice R. "Hank" Greenberg, as well as several other senior company executives. The settlement must still be approved by the U.S. District Court for the Southern District of New York.
Two former CEOs of AIG, Robert Willumstad and Martin Sullivan, testified to the House Committee on Oversight and Government on Tuesday about the collapse of the insurance giant. They blamed the effects of accounting rules and the actions of short sellers as contributing factors. But committee chairman Henry Waxman, D-Calif., blamed the former executives for the company's problems and criticized their large bonuses. Greenberg did not appear at the hearing, citing health problems, but he sent written testimony to the committee. Like the other CEOs, Greenberg blamed fair value accounting and short selling for the problems at the company, but also said that his successors eliminated the risk controls he had put in place at AIG.
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