CHICAGO - A federal judge has appointed Michigan lead plaintiff representing stock- and bondholders in a class action lawsuit seeking to recover losses from investments in insurance giant American International Group Inc.
Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York last Friday consolidated eight proposed class actions and granted Michigan's request that it act as lead plaintiff in the consolidated complaint.
As lead plaintiff, Michigan will oversee the litigation against AIG and seek to maximize the amount of money recovered for the class, said state officials.
The lawsuit accuses AIG of violating federal securities laws by misleading investors about the risks of the company's exposure to credit default swaps and other investments in the subprime mortgage market, according to state officials. The suit covers the period from November 2006 through June 2008.
Michigan first sued AIG in May 2008 over losses in its massive Michigan Retirement Systems fund, one of the largest pension systems in the country. State treasury officials said the fund lost more than $100 million due to investments in AIG. The fund had combined assets of around $44.5 billion as of the end of 2008, said treasury spokesman Terry Stanton.
"The state of Michigan has an obligation to protect the pension funds for more than 574,000 participants and retirees," said state Treasurer Robert Kleine in a statement released this week. "Our decision to pursue lead plaintiff status sends a clear message that we will take every step necessary to recover lost funds and ensure our investments do not fall victim to fraudulent activity."
Parties interested in joining the lawsuit have 60 days to do so. A consolidated compliant will be filed in May on behalf of all investors, Stanton said.
Michigan Attorney General Mike Cox, who is working with the treasurer's office on the case, warned this week that other "reckless" investment firms would be held accountable for losses in state pension funds.
The state has hired Pennsylvania-based law firm Barrack, Rodos, and Bacine and the Michigan-based Miller Law Firm PC as its counsel in the case.
In January, Michigan was appointed lead plaintiff in a national class-action case against Bear, Stearns & Co. for $62 million in losses to its pension fund. Last September Cox negotiated a settlement with Comerica Inc. to buy back $1.46 billion of auction-rate debt bought by investors from Comerica Securities.
The Michigan Retirement Systems invests on behalf of public school employees, state employees, police, and judges.