American International Group, Inc. has agreed to pay $960 million cash to settle the 2008 securities class action filed against it related to the financial crisis. Combine with a separate $10.5 million settlement paid by another defendant, the total settlement fund in the case is a massive $970.5 million.

 

The settlement came after six years of litigation led by plaintiffs law firm Barrack Rodos & Bacine on behalf of lead plaintiff State of Michigan Retirement Systems. Plaintiffs alleged that AIG made material misstatements and omissions concerning its credit default swap portfolio as well as its securities lending program. The class includes purchasers of AIG common stock, corporate units, bonds, subordinated debentures and notes from March 16, 2006 through September 16, 2008.

 

The $970.5 milion settlement, which still requires court approval, is one of the largest in a securities class action, falling just outside the top 10 all-time. The largest such settlement remains the $7.2 billion settlement in the Enron case back in 2008. Barrack Rodos partner Robert Hoffman said the proposed AIG settlement is "one of the largest ever achieved in the absence of a criminal indictment or an SEC enforcement action."

 

According to Kevin LaCroix of the D&O Diary, the proposed $970.5 million AIG settlement would be the second-largest securities class action settlement to arise out of the financial crisis, behind only the $2.43 billion BofA/Merrill Lynch settlement. Other significant financial crisis settlements noted by LaCroix include:

 

Citigroup bondholders’ settlement ($730 million); 

Wachovia Preferred Securities and Bondholder settlement ($627 million); and

Countrywide securities settlement  ($624 million)