COLUMBUS, Ohio (Legal Newsline) - General Reinsurance Corp. is paying $72 million to settle allegations brought by the State of Ohio, new Attorney General Richard Cordray announced Wednesday.
The company was part of a fraudulent $500 million reinsurance transaction with troubled American International Group, it is alleged. Cordray is the fourth Ohio attorney general to oversee the case, first filed by Marc Dann.
The state's Public Employees Retirement System, Teachers Retirement System and Police and Fire Pension Fund were seeking damages for investors who bought AIG securities from 1999-2005. Four former Gen Re executives and one former AIG executive were convicted of securities fraud with the deal in Feb. 2008.
"When the truth about this fraud and other AIG manipulations was made public, the price of AIG stock declined," Cordray said.
"Investors, including Ohio's pension funds, had been deceived and suffered significant financial losses."
Also representing the Ohio agencies were Labaton Sucharow LLP of New York City and Hahn Loeser & Parks, LLP, which has offices in Cleveland and Columbus.
Cordray said evidence showed each of the five executives conspired to allow AIG to falsely report increases in loss reserves to analysts and investors in its filings with the federal Securities Exchange Commission. The loss reserves are a key indicator of financial health to investors, Cordray added.
Former interim Attorney General Nancy Rogers announced a $97.5 million settlement with PricewaterhouseCoopersLLP as part of the case in October. That company was alleged to have violated securities laws by providing auditing services and unqualified audit opinions on AIG's financial statements.
From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.