PricewaterhouseCoopers LLP, American International Group's auditor when its price-fixing and accounting scandals erupted, has agreed to pay $97.5 million to settle claims by three Ohio state pension funds that invested in AIG.
The office of Ohio Attorney General Nancy Rogers said Friday that the firm's agreement to settle investors' claims in securities litigation against AIG will be one of the 10-highest settlements to be paid by an accounting firm to settle a securities fraud class-action.
PricewaterhouseCoopers said in a statement that it "decided to settle the case at this stage to avoid the enormous litigation cost that would be incurred if the case continued against the firm, while at the same time eliminating any potential exposure."
PwC added that "the settlement does not contain an admission of wrongdoing by the firm, and we continue to believe that our work was in accordance with professional standards."
The firm, which continues to serve as AIG's independent auditor, was alleged in the class-action complaint to have violated securities laws in connection with its provision of auditing services and its issuance of unqualified audit opinions on AIG's financial statements during seven years at issue in the case.
"This important settlement represents a tremendous result for investors," said Chris Geidner, principal assistant attorney general. "We are pleased with this milestone, and will continue to vigorously pursue investors' claims against the remaining defendants in the case."
Others accused in the securities fraud action brought on behalf of the pension funds are AIG; its former chief executive officer and chairman, Maurice Greenberg; General Re Corp, a unit of Berkshire Hathaway Inc.; as well as several other former current officers and directors and other entities.
The accounting problems that were the basis of the suit led to the ouster of Mr. Greenberg, as well as AIG's chief financial officer at the time, Howard Smith.
The settlement is pending approval by U.S. District Court Judge John E. Sprizzo in Manhattan Federal Court.
Mr. Geidner said one model estimate of the damages to all AIG shareholders during the period was $14.5 billion.
The Ohio Attorney General's Office is 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–and seeks damages for investors who purchased AIG securities between Oct. 28, 1999, and April 1, 2005.
The Ohio suit was based on AIG's involvement in a commercial insurance price-fixing scheme with brokers that was disclosed in October 2004, as well as improper accounting by AIG for reinsurance and other transactions that led to the company's $3.9 billion restatement or adjustment of earnings in May 2005.
Another result came this February, when a federal jury in Hartford, Conn., convicted four Gen Re executives and one AIG executive for conspiracy and securities fraud in connection with a sham finite reinsurance deal designed to inflate AIG's financial picture.
The Ohio Attorney General's Office and the three Ohio pension funds are represented in the case by Labaton Sucharow LLP in New York City, and Hahn Loeser & Parks, LLP, which has offices in Cleveland and Columbus.
In addition to those already mentioned, defendants in the action are: Martin J. Sullivan, Thomas R. Tizzio, Michael J. Castelli, Christian M. Milton, L. Michael Murphy, John A. Graf, Frank J. Hoenemeyer, Eli Broad, Starr International Company, Inc. (aka SICO), C.V. Starr & Co., Inc., Richmond Insurance Company Ltd., PricewaterhouseCoopers LLP, General Reinsurance Corp., Ronald E. Ferguson, John B. Houldsworth, Richard Napier,Wachovia Securities, Inc. and Merrill Lynch & Co.
This article was updated 2;28 p.m.
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