NEW CASES
Company: American International Group, Inc.
American International Group, Inc. (“AIG” or the “Company”) (NYSE:AIG) (CUSIP: 026874107) through its subsidiaries, provides insurance and financial services in the United States and internationally. It operates in four segments: General Insurance, Life Insurance and Retirement Services, Financial Services, and Asset Management.
During the Class Period defendants violated the federal securities laws by issuing false and misleading press releases, financial statements, filings with the SEC and statements during investor conference calls. Defendants repeatedly reassured investors that AIG had successfully insulated itself from the recent turmoil in the housing and credit markets due to its superior risk management. In particular, defendants touted the security of American International Group Financial Products’ (“AIGFP”) “super senior” credit default swap (“CDS”) portfolio, making repeated statements that this portfolio was secure and that AIG’s method for accounting for the valuations of this portfolio accurately reflected its value.
On December 5, 2007, AIG’s CEO Martin Sullivan claimed that AIG had “little to no exposure” to asset-backed commercial paper, structured investment vehicles or collateralized debt instrument tied to residential mortgage-backed securities. According to Sullivan, the likelihood that CDS portfolio would sustain actual losses was “close to zero.” Furthermore, Sullivan stated, AIG was “confident” in its valuation methods and that, given the Company’s size, financial strength and global diversification,” its exposure to the U.S. residential housing market was “manageable.”
On February 11, 2008, investors began to learn the truth regarding AIG’s financial condition and the Company’s exposure to the mortgage market when the Company disclosed that its outside auditor had determined that there was “material weakness in its internal control” over the financial reporting and oversight relating specifically to its accounting for the CDS portfolio, and that the Company was revising the loss valuations it previously reported. According to the Company, by applying the proper valuation method, AIG’s actual, losses on the CDS portfolio more than quadrupled -- from the $1.4 billion reported on the CDS portfolio just weeks before to between $4.5 billion and $6.0 billion. On this news, AIG stock dropped 12% from $50.86 to $44.74 wiping out $15 billion in shareholder value.
Two weeks later, on February 28, 2008, AIG again revised the valuation on ithe CDS portfolio and disclosed that losses would increase to $11.5 billion and revealed for the first time that the Company had exposure of $6.5 billion in liquidity puts written on collateralized debt obligations (“CDOs”) linked to the sub-prime mortgage market.
Finally, on May 8, 2008, the Company disclosed that market valuation losses on the CDS portfolio for the quarter climbed an additional $9.1 billion, for a cumulative loss of $20.6 billion, and that the Company was expecting actual losses on the portfolio to be about $2.4 billion. These disclosures sent shares tumbling 13% over the next two trading days from $44.15 to $38.37 per share, eliminating $14.4 billion in AIG’s market capitalization.
Defendants: AIG, Chief Executive Officer Martin J. Sullivan, Executive Vice President and Chief Financial Officer Steven J. Bensinger, Senior Vice President and Chief Risk Officer Robert Lewis and Joseph Cassano, the former head of AIG subsidiary AIGFP.
Please contact us if you would like to discuss our investigation.
Nancy Kaboolian
Partner
P: 212.889.3700
E: nkaboolian@abbeyspanier.com |
