Reinsurer to settle Ohio fraud suit for $72 million Tracy Turner The Columbus Dispatch, Ohio McClatchy-Tribune Regional News

Feb. 26--General Reinsurance Corp. has agreed to pay $72 million to settle a securities-fraud lawsuit brought by the Ohio attorney general's office against insurer American International Group and related parties, the attorney general said yesterday.

Gen Re is alleged to have participated in a fraudulent $500 million reinsurance transaction with AIG that allowed the company to improperly inflate its loss reserves, Ohio Attorney General Richard Cordray said.

Loss reserves are a key indicator of a company's financial health to investors and insurance industry analysts.

"When the truth about this fraud and other AIG manipulations was made public, the price of AIG stock declined," Cordray said in a statement. "Investors, including Ohio's pension funds, had been deceived and suffered significant financial losses."

The Ohio attorney general is the lead plaintiff in the class-action lawsuit, which was filed in 2004.

The state took action on behalf of AIG shareholders, including the Ohio Public Employees Retirement System, the State Teachers Retirement System and the Ohio Police & Fire Pension Fund.

The suit was filed after the New York attorney general uncovered what appeared to be violations of securities law by AIG and other insurers.

The settlement is subject to approval by the U.S. District Court in Manhattan.

Once that happens, the money will be distributed among those who bought AIG securities between Oct. 28, 1999, and April 1, 2005, said Ted Hart, Cordray's spokesman.

Hart said, however, it is too early to determine who will get what.

The settlement comes one year after PricewaterhouseCoopers agreed in January 2008 to pay $97.5 million to partially settle a lawsuit filed by the Ohio attorney general's office. The company is AIG's independent auditor.

Four former Gen Re executives and one former AIG vice president were convicted in federal court in Hartford, Conn., on charges of conspiracy and securities fraud.

tturner@dispatch.com
Copyright (c) 2009, The Columbus Dispatch, Ohio Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. Feb. 26--General Reinsurance Corp. has agreed to pay $72 million to settle a securities-fraud lawsuit brought by the Ohio attorney general's office against insurer American International Group and related parties, the attorney general said yesterday.