Pension Fund Sues AIG Over Losses

September 18, 2008 ( - A public pension fund has sued the chief executive and board of American International Group (AIG), accusing them of mismanagement and "grossly imprudent risk taking" that led to the need for the insurer's $85-billion government rescue.

The City of New Orleans Employees’ Retirement System filed the lawsuit in Delaware Chancery Court, where many shareholder disputes are filed, Reuters reported. The case was filed on Wednesday against AIG Chief Executive Robert Willumstad, lead director Stephen Bollenbach, and other current and former officers and directors.

The pension fund said it wants the defendants to return all compensation among other damages. “While many financial institutions have suffered in connection with subprime and other housing related issues in recent months, AIG has watched its stock drop by close to 95% since June 2007, has wasted untold goodwill, and has watched its already dubious reputation suffer immense additional harm,” the lawsuit contended.

According to the news report, the fund, an AIG shareholder, said the defendants are to blame for the company’s “exposure to and grossly imprudent risk taking in the subprime lending market and derivative instruments.”

AIG spokesman Joe Norton declined to comment to Reuters on the case.