Company Men Get Slice of AIG Investor Settlement

     (CN) — Finding that employee retirement plans are separate from the company, the Second Circuit on Tuesday said American International Group investors cannot keep a $725 million settlement to themselves.
     The investors brought the underlying class action over a decade ago, accusing insurance giant AIG of entering into a sham $500 million reinsurance transaction with Gen Re designed to mislead investors and artificially inflate AIG’s share price.
     At a time when investors were concerned about reductions in the company’s loss reserves, such a transaction allegedly permitted AIG to report added reserves of $106 million for the fourth quarter of 2000. Gen Re received a $5.2 million side payment for its role in the deal, according to the complaint.
     Gen Re received a $5.2 million side payment for its role in the deal, according to the complaint.
     AIG eventually reached a series of settlements on the claims. In 2012, a federal judge in Manhattan approved a deal that provides $725 million to a class of investors who bought AIG stock between October 1999 and April 2005.
     AIG’s own employee benefit plans appealed the settlement, however, claiming that they should be entitled to their own slice of the settlement pie.
     Though the court denied the request, holding that retirement plans are “affiliates” of AIG, the Second Circuit reversed Tuesday.
     “Because ERISA imposes important statutory limits on an employer’s control over the management and policies of an employee benefit plan, those plans do not fall within the ordinary meaning of ‘affiliate,'” U.S. Circuit Judge Rosemary Pooler wrote for the three-judge panel. “Thus, appellants are entitled to their own slice of the settlement pie and appellees will have to live with a somewhat smaller portion.”
     Appellants refers to the plans behind the appeal: the AIG Incentive Savings Plan, American General Agents’ and Mangers’ Thrift Plan, AIG Reitrement Plan, and AIG Insurance Company — Puerto Rico Capital Growth Plan.
     Pooler said AIG’s ability to appoint and remove members of the plans’ boards does not equate to corporate control over the management and policies of the plans.
     “ERISA’s imposition of strict fiduciary duties blocks such corporate influence,” the 41-page opinion states, even though two AIG Retirement Board members were also executives at AIG during the class period.
     “ERISA expressly contemplates scenarios where a sponsor might appoint its own officers and directors to a plan’s board,” Pooler said. “But these officers and directors, who are permitted to ‘wear different hats,’ must nonetheless ‘wear only one at a time, and wear the fiduciary hat when making fiduciary decisions.'”

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