AIG face lawsuit for deliberate deception

by David Masters

Story link: AIG face lawsuit for deliberate deception

US-based American International Group (AIG) is facing its first lawsuit following the company’s announcement of a $7.8 billion loss in the first quarter.

The insurance giant is being sued by Jacksonville Police and Fire Pension Fund.

Bernstein Litowitz Berger & Grossmann LLP filed the lawsuit in a New York court this Wednesday on behalf of the Florida-based fund.

The fund is accusing AIG, and some of its top-level executives, of deliberately understating the group’s exposure to the subprime mortgage crisis to inflate stock price.

Members of AIG’s senior executive had assured investors that the company would come through the mortgage crisis relatively unscathed because of its conservative approach to risk management.

Investors, therefore, were shocked when AIG announced losses of $7.8 billion for the first quarter. It was the first time ever that the company reported a loss for two consecutive quarters.

John Keane, executive director of the Jacksonville fund, said that AIG ‘manipulated the market by making false statements’, leading to heavy losses for investors.

AIG have declined to comment on the lawsuit. The group’s shares recently hit their lowest price since October 1998.