In a Monday filing with the U.S. Securities and Exchange Commission, AIG said the parties agreed to submit to binding arbitration to settle several disputes, including shareholder derivative litigation, and will consider arbitration on other AIG claims against former affiliate Starr International Co. Inc., which Mr. Greenberg now controls.
In June 2007, AIG took over a $1 billion shareholder derivative suit against Messrs. Greenberg and Smith over alleged wrongdoing—related to accounting and other practices—and resulting losses to the company (BI, June 18, 2007). That suit prompted a counterclaim from Messrs. Greenberg and Smith against AIG.
Mr. Greenberg, AIG’s former chairman and chief executive officer, and Mr. Smith, the insurer’s former chief financial officer, left AIG in 2005 amid investigations into the company’s accounting.
The arbitration will not include any claims currently being prosecuted in pending cases by AIG shareholders against Messrs. Greenberg and Smith, AIG said.
The parties have agreed to propose lists of potential arbitrators by Sept. 15, 2009, and aim to have a final binding decision set by March 31, 2010, the filing said.
In a statement, AIG said the private arbitration would be “more expeditious and cost-effective.”
Earlier this month, Messrs. Greenberg and Smith and a group of other former executives agreed to pay $115 million to settle a shareholder lawsuit over allegedly false statements regarding the insurer’s financial results. In addition, the former executives recently settled charges with the SEC, with Mr. Greenberg agreeing to pay $15 million and Mr. Smith agreeing to pay $1.5 million.
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