There always seem to be new problems for American International Group. On Tuesday a California shareholder filed a derivative lawsuit against the insurer and its top executives and directors over its exposure to the subprime-mortgage crisis, the Associated Press reported.
The lawsuit, brought by Doris Staeher, alleges that AIG hid the true extent of its exposure to subprime mortgages, claiming its portfolio was sufficiently diversified and that the mortgage market would have to reach “Depression proportions” before it was affected negatively, according to the report.
“While defendants were directing AIG to issue improper statements concerning its exposure to the subprime market crisis, they were also directing AIG to repurchase over $3.7 billion worth of its own shares at artificially inflated prices,” the lawsuit reportedly states. “Even worse, certain defendants sold their personally held shares while in possession of material nonpublic information for over $6 million in proceeds.”
The lawsuit seeks damages for breaches of fiduciary duty and waste of corporate assets by AIG’s top executives and directors. The suit also calls on the company to improve its corporate governance.
Reuters noted that in the third quarter, AIG reported a 13 percent drop in earnings, caused in part by its exposure to the crumbling mortgage market. The company’s mortgage woes came after it worked hard to overcome its troubles stemming from the abuse of finite insurance uncovered at AIG and other insurers.