25 Nuveen Investments Inc. funds have filed a securities fraud lawsuit against American International Group (AIG) accusing the company of federal securities laws and Illinois securities law violations, common law fraud, and unjust enrichment in the months before the 2008 US financial crisis. They want unspecified monetary damages. Also named as defendants are ex-CEO Martin J. Sullivan, ex-CFO Steven Besinger, and Joseph Casano, who was in charge of the AIG Financial Product unit.
Among the funds suing AIG are the Nuveen Large Cap Value Fund, the Nuveen Equity Premium Opportunity Fund, and the Dow 30 Enhanced Premium. The funds purchased AIG securities at prices that were purportedly inflated and dropped when the truth was revealed.
The plaintiffs claim that they lost tens of billions of dollars in part because of materially misleading and false statements that AIG and others allegedly made. They contend that when the housing market started to fail, AIG told analysts that the risks it faced were “modest and remote” and that they didn’t see any potential financial losses tied to the swaps business.
AIG began upping its writing of credit default swap contracts in 2005 and started focusing on US residential mortgage loans, including subprime loans. It was around this time that its AIG Financial Products unit ceased its insuring of certain credit default obligations due to what it cited as a drop in standards for subprime loan underwriting.
The Nuveen funds believe that AIG did not disclose that it was experiencing an internal control weakness tied to its valuing of the CDS portfolio and it wasn’t until February 2008 that AIG stated in a filing with the SEC that it did not properly estimate its swaps portfolio market losses. By September of that year, AIG required federal aid of $85 billion because it was verging on bankruptcy. That amount would later go up to $182.3 billion.
The securities fraud case was filed in court in Chicago. However, the plaintiffs they said they would qualify to be part of the lawsuit against AIG in federal court in Manhattan if the judge determines that the case can move forward as a class action securities case.
Also making similar fraud claims against AIG is the Regents of the University of California. The Regents claim that the company concealed its subprime mortgage exposure between 2006 and 2008 and inflated its stock price, which caused the university system to suffer losses when shares of AIG dropped.
Our securities fraud law firm represents institutional clients and high net worth individuals with claims against financial firms, investment banks, broker-dealers, investment advisers, brokers, and financial representatives. Over the years, Shepherd Smith Edwards and Kantas, LTD, LLP has helped thousands of investors recoup their losses.’
Nuveen Funds Sue AIG, Executives for Securities Fraud, Bloomberg, August 7, 2013
University of California regents sue AIG over subprime mortgages, Housingwire, August 8, 2013
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