AIG agrees to pay $725m in settlement

NEW YORK, July 17 (UPI) -- U.S.-based American International Group Inc. has reached a $725 million settlement in a securities lawsuit alleging insurance bid-rigging, records show.

AIG must pay $175 million within 10 days of winning preliminary approval of a federal judge in New York and $550 million later, The Wall Street Journal reported.

The long-running civil lawsuit, filed by a group of Ohio pension funds, accused the insurer of trying to inflate its stock price and of accounting fraud that artificially boosted its insurance reserves.

Investors in AIG pension funds filed the lawsuit after the company and its chief executive, Maurice Greenberg, were accused of wrongdoing by former New York Attorney General Eliot Spitzer in 2005. The company has not admitted any wrongdoing.

The settlement will allow AIG, which was bailed out by the government in 2008, "to continue to focus its efforts on paying back taxpayers and restoring the value of our franchise for the benefit of all our stakeholders," the company said in a statement.

The plaintiffs have the option of ending the settlement or recovering funds in another way if AIG fails to raise the funds before the court gives final approval. Under terms of the settlement, the insurer must pay the $550 million if it raises that amount as part of its repayment of the government bailout.

The settlement represents "final resolution of this matter," Ohio Attorney General Richard Cordray told the Journal. The total expected recovery for AIG shareholders through lawsuits related to the 2005 allegations has reached more than $1 billion, the Journal said.