Court Narrows Investment Firms’ Claims Against AIG

By | September 11, 2015

American Group International Group Inc. won a decision that narrowed the claims by six investment funds that opted out of a $970.5 million class-action settlement last year over allegations the insurer misled investors about its exposure to subprime mortgages.

U.S. District Judge Laura Taylor Swann in Manhattan on Thursday agreed with AIG that the funds can’t pursue damages under the U.S. Exchange Act for alleged misrepresentations made more than five years before the lawsuits were filed.

The funds, including the Regents of the University of California, claim AIG lied to investors from about 2006 to 2008 about the risks the company was exposed to. One of the funds that opted out had sued as early as 2011, leaving its Exchange Act claims intact. Two others that didn’t sue until February of this year had agreements with AIG that preserved their claims beyond the so-called statute of repose.

The judge also dismissed claims against two former AIG executives, Joseph Cassano and and Andrew Forster, to the extent that the funds sought to hold them liable under the Exchange Act for allegedly fraudulent statements by AIG. Cassano and Forster worked for American International Group Financial Products Corp., which was involved in the origination of credit default swaps tied to the U.S. housing market.

AIG, the largest commercial insurer in U.S. and Canada, shrunk by half since the financial crisis by divesting assets to repay a $182.3 billion government bailout. The company agreed in 2010 to pay $725 million to settle a lawsuit by investors including Ohio and California pension funds as litigation mounted.

In April, Pacific Investment Management Co. filed an opt- out suit against AIG in state court in Santa Ana, California.

The case is Kuwait Investment Office v. American International Group Inc., 11-cv-08403, U.S. District Court, Southern District of New York (Manhattan).

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