PricewaterhouseCoopers US (PwC) has agreed to pay $97.5 million to the State of Ohio to settle investors’ claims in securities litigation against insurance company American International Group (AIG).
According to the office of the Attorney General for Ohio, this represents one of the ten highest settlements paid by an accounting firm in a securities fraud class action in the US.
The class action is on behalf of three plaintiffs – the Ohio Public Employees Retirement System, State Teachers Retirement System and Ohio Police and Fire Pension Fund – who are seeking damages for investors who purchased AIG securities between 28 October 1999 and 1 April 2005.
The claims are based on AIG’s alleged involvement in a market division scheme with others in the insurance industry, which was disclosed in October 2004. The case also includes AIG’s improper accounting for reinsurance and other transactions, which led to the company’s $3.9 billion restatement or adjustment of earnings in May 2005.
These accounting issues led to the dismissal of AIG’s then chairman and chief executive Maurice Greenberg as well as several other senior executives.
PwC, which continues to serve as AIG’s independent auditor, was alleged to have violated the securities laws in connection with its audit services and issuance of unqualified audit opinions on AIG’s financial statements during the years at issue in the case.
The settlement must now be approved by the United States District Court for the Southern District of New York.
Commenting on the settlement, the firm said in a statement: “We have decided to settle the case at this stage to avoid the enormous litigation costs that would be incurred if the case continued against the firm, while at the same time eliminating any potential exposure.
“The settlement does not contain an admission of wrongdoing by the firm and we continue to believe that our work was in accordance with professional standards.”
The principal assistant of the Ohio Attorney General, Chris Geidner, said the settlement represents a tremendous result for investors.
“We are pleased with this milestone and will continue to vigorously pursue investors’ claims against the remaining defendants in the case,” Geidner said.