NU Online News Service, Aug. 27, 2:24 p.m.EDT

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Attorneys will be in federal court in Chicago on Monday todiscuss management of a prospective class-action for more than 500insurers, which accuses American International Group of civilracketeering and fraud.

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The case–so complex that a judge said it may take an actuarialexpert to unsnarl it–stems from the revelation in 2005 that AIG"for several decades" filed fraudulent reports to avoid thefinancial impact of taking on its proportionate share of theNational Workers' Compensation Reinsurance Pool (NWCRP).

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According to the suit brought by Safeco Insurance Company ofAmerica and Ohio Casualty Insurance Company, as a result of AIG'sfraud, they and other insurers participating in the assigned riskpool lost hundreds of millions because of the additionalliabilities they had to take on.

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The Safeco suit alleges that AIG, despite admitting past illegalactivity, has currently engaged in "efforts to substitute new falsestatements…in furtherance of the AIG defendants' fraudulentschemes."

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AIG for its part has countersued, claiming other insurers haveengaged in false reporting to the pool. The company's lawyer saidhe will file a motion contesting any decision to give the suitclass-action status.

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U.S. District Court Judge Robert W. Gettleman had put a stay onthe Safeco action while he dealt with a previous suit by theNational Council on Compensation Insurance, Inc. on behalf ofinsurers in the pool.

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He removed the stay on Aug. 20 when he ruled that NCCI lackedstanding to bring a case because the insurers in the pool had notgiven NCCI legal title to their claims against AIG.

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His ruling recounted the history of the case, which was sparkedby a New York State investigation finding "several decades" of AIGfalse reporting of its workers' comp premiums that are the basisfor setting a company's proportionate share of the NWCRP.

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AIG reached a $1.6 billion settlement with New York and federalauthorities in 2006. Part of that amount involved $42 million tovarious states and $301 million that was to go to "thosevictimized," but according to Safeco, AIG has "yet to make a fulland complete restitution for the financial injury caused to theclass."

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Judge Gettleman, who is due to meet with the lawyers for Safecoand AIG Monday to set a schedule for arguments, mentioned to theattorneys last week the possibility of having an expert overseematters.

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According to the transcript, the judge commented that "AIG hasconceded that it did engage in this conduct. The other issue seemsto be did the other folks [insurers] engage in this conduct aswell. There is a lot of wiggle room there."

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He added that "somewhere down the line, my guess is if we upholdthe notion of similar conduct, there would be a Special Masterappointed or something like that to sort this all out, some actuarytype, something like that, if we could find one without a conflict,which might not be easy."

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Gary Elden, an attorney for Safeco, told the judge that heintends to file a motion amending the company's complaint, which inaddition to AIG companies lists as defendants Thomas R. Tizzo(retired AIG president), Richard L. Thomas (an AIG senior vicepresident) and Joseph Smetlana (former president and chair of AIGRisk Management), who is called the creator of the false reportingscheme.

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"What I'm saying is that there may not be a class-action case,and therefore nothing needs to be discovered," Stephen Novack, theattorney representing AIG, said after the judge noted that Safecowould be filing for class certification.

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"Well, that hasn't yet been decided," the judge responded.

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Maurice R. Greenberg, AIG's former CEO and chair–who thecomplaint says was part of management that directed the falsereporting–is not listed as a defendant.

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