The announcement came at about the same time that the federal government settled with Goldman Sachs over that company’s alleged misleading of investors about debts linked to subprime mortgages.
The Goldman Sachs case was the much more ballyhooed one, eyed as the possible debut of a new toughness at the Securities and Exchange Commission. And yet the feds got less, only $550 million.
And, as the Ohio attorney general is quick to note, the AIG $750 million comes on top of other money AIG has already agreed to pay in connection with the litigation, bringing the total to roughly $1 billion.
Unfortunately, AIG doesn’t have that kind of money sitting around. And it can’t use taxpayer bailout money without raising a lot of eyebrows. So, to pay off Ohio, it will have to sell stock, an iffy proposition. Ohio could still end up not getting all it’s owed.
Looking at the big picture, one might reasonably ask if the general public benefits from the settlement. After all, the general public is the main owner of AIG. The government took an 80-percent share as part of the bailout. This settlement isn’t likely to raise the value of AIG stock.
But the settlement is certainly in the interest of Ohio. State pensions have taken a beating from the collapse of Wall Street financial institutions (to the tune of about $800 million for five different pension systems). Then came the beating from the collapse of BP stock after the Gulf catastrophe.
All that comes atop the growing recognition that the plans face major long-term problems — because they can’t keep paying the generous benefits retirees get — even in the absence of specific investment catastrophes.
The AIG lawsuit was actually filed by then-Attorney General Jim Petro in 2004. But it is much in the Cordray vein. He’s won a leading national role in a pending suit against Bank of America. He’s won almost a half billion dollars from Merrill Lynch.
The AIG case involves charges of stock manipulation, bid-rigging and accounting fraud dating as far back as 1999. A former AIG executive has already been convicted. That raises questions about just how much credit Mr. Cordray deserves for winning a settlement. A central part of his case was made for him.
Still, his useful aggressiveness cannot be denied.
Now he has joined with New York Attorney General Andrew Cuomo to seek “lead plaintiff” status in a case against BP. The idea is to show that BP misled investors with statements about its safety precautions and its ability to handle a major mishap. That sounds harder to prove than some of the charges against Wall Street firms. But, on the basis of the outcomes so far, nobody can charge that Mr. Cordray is proceeding frivolously.
He’s getting likened to Eliot Spitzer, whose successful pursuit of misbehaving corporations vaulted him from attorney general of New York to governor, before certain misbehavior on his part relegated him to the role of cable television talker.
Mr. Cordray has not simply decided to go after corporations as an easy way to get the government some free money. He’s responding to specific harm done to specific state institutions by specific behavior. That’s fair enough.
Still, if he could come up with a way to address the looming crisis in the state’s general fund — the much-noted deficit of $6 billion to $8 billion — listening couldn’t hurt.
— Cox News Service