Filed in US District Court for the Southern District of New York, the suit alleges that AIG plan fiduciaries breached their ERISA-mandated duties by causing participants to invest in and/or maintain their investment in company stock from November 1, 1998 until the present, according to a press release. The suit contends that during this period, AIG failed to disclose certain improper business practices, namely the “contingent commissions” and “bid-rigging” practices that were contained in charges from New York state Attorney General Eliot Spitzer.
Stating that these illegal practices inflated AIGs revenue and income, the suit claims that the stock price was artificially high. With AIGs involvement in the recent scandal, the company has been exposed to penalties and fines, and its stock price has tumbled.
The goal of the suit, according to the news release, is to recover damages sustained by participants or beneficiaries in the company’s 401(k) plan.
Two AIG executives were the first people charged in the probe by Spitzer, which has landed the insurance industry in hot water for certain practices such as bid-rigging and contingent commissions (See Spitzer Takes On Contingent Commissions ). Marsh & McLennan and Zurich Financial Services, among others, have been drawn into this wide-ranging investigation.