Minnesota Attorney General Mike Hatch is suing American International Group, claiming the company's recent agreement with New York authorities to settle accounting fraud charges fails to properly compensate Minnesota for AIG underpayments to its workers' compensation system.

The Minnesota suit, filed in Ramsey County District Court last week, charges the AIG global settlement, which totals $1.64 billion, falls short of compensating the state for tax revenue lost through AIG understatement of its workers' comp premiums.

Under the settlement reached with the New York Insurance Department and Attorney General's Office and federal officials, Minnesota would have received an estimated $1.2 million out of a total of $344 million, which will go to states where AIG underpaid workers' compensation premium taxes and assessments from 1985 to 1996.

“These steps, coming ten years or more after AIG was advised to stop its fraudulent practice and take immediate corrective action, fall short of compensating the various Minnesota funds and entities injured by AIG's unlawful conduct,” the suit stated.

An attorney general spokesman estimated the state's take should have been $10 million.

The suit charges that in 1992, AIG's then general counsel deemed the practice misreporting workers' compensation premiums as “permeated with illegality.”

AIG could not settle its case with Minnesota by merely agreeing with New York and federal authorities on the global settlement that was announced earlier this month, the suit asserted.

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Minnesota Sues AIG For Comp Funds

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