LANSING, Mich. (Legal Newsline) - Michigan Attorney General Mike Cox announced on Tuesday that a national class action securities fraud lawsuit is moving forward with Michigan serving as lead plaintiff.
The suit against American International Group, Inc., alleges that the company violated federal securities law by misleading investors about the value of sub-prime related securities.
Many Michigan taxpayers were affected and it is believed that their actions cost the State of Michigan Retirement Systems $109 million and other investors billions of dollars, Cox says.
"Our efforts to put investment firms on notice will move forward," Cox said. "They will be held accountable for reckless actions that put the millions of taxpayer dollars at risk."
U.S. District Judge Laura Taylor Swain denied 12 separate motions by AIG and co-defendants to dismiss the lawsuit, writing that Michigan's allegations "support an inference that is 'at least as compelling as any opposing inference' that AIG and the defendants knew facts or had access to information suggesting that their public misstatements were not accurate."
The class action suit alleges that AIG misled investors as to the true value of Credit Default Swaps during the period of Nov. 10, 2006 through June 6, 2008.
Credit Default Swaps are securities tied to sub-prime mortgages. When their true value was revealed in 2008, AIG's stock dropped from more than $70 per share in 2007 to approximately $1 per share in 2009.
As lead plaintiff, Michigan is responsible for managing the litigation on behalf of a class of AIG stock and bond holders. It will also negotiate potential settlement terms and seek to maximize the recovery for the class.
State of Michigan Retirement Systems, which invests on behalf of Michigan Public School employees, state employees, state police and Michigan judges, holds combined assets of approximately $45.6 billion, making it one of the largest pension systems in the nation.