AIG: AIG has a $1.5 trillion risk
The insurer of American Airlines and American Airlines Northwest will pay nearly $1 billion in a settlement with regulators for allegedly inflating the costs of insurance policies it sold to customers, the Justice Department announced Monday.
The settlement is the biggest ever to be reached in a class-action lawsuit alleging fraud in the insurance industry, and the biggest for a corporation.
The Department of Justice said AIG failed to provide customers with adequate insurance when the company ran afoul of the law.
In addition to paying $1,085 million, the company will pay a $25 million penalty and reimburse all of the victims of the fraud.
The deal includes an admission of liability and penalties, and includes a $10 million civil penalty and $1 million in restitution.
In a statement, the Department of Labor said the settlement “represents a significant investment in consumer protection.”
The DOJ said the company knew that AIG had a $9 billion loss in the fourth quarter of 2013.
It said it made an inappropriate and misleading decision to sell policies to customers.
In its statement, AIG said it was “disappointed” that the Justice Dept. had decided to take such a drastic step.
“The company fully cooperated with the Department’s investigation, and we are committed to doing everything we can to restore our reputation and our customers’ trust,” AIG President Robert McNamara said.
In September, the DOJ said Aig’s former CEO, John Flannery, had failed to properly report his losses, and that the company had paid $1 trillion in the United States alone to cover its losses.
The DOJ said it had identified $1-billion of AIG’s loss as being a result of fraudulent claims.
The Justice Department said it would be releasing more information about the settlement soon.