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Shareholders of the insurance giant American International Group have won approval of a $970.5 million settlement resolving claims that they were misled about its subprime mortgage exposure, leading to a liquidity crisis and $182.3 billion in federal bailouts.
Judge Laura Taylor Swain of Federal District Court granted final approval at a hearing in Manhattan on Friday for what lawyers for the investors called one of the largest class-action settlements to come out of the 2008 financial crisis.
It is the largest shareholder class-action settlement in a case in which no criminal or regulatory enforcement actions were ever pursued, the plaintiffs' lawyers have said.
AIG said it was pleased with the judge's order.
The Justice Department and the Securities and Exchange Commission closed related investigations involving AIG in 2010.
Judge Swain noted that no potential class member had objected to the terms of the deal, which she said was strong evidence that it was "fair, reasonable and adequate" and should be approved. She said that the amount was "very substantial" and that shareholders would face significant risk if they continued to litigate instead of settling.
The settlement covers investors who bought AIG securities from March 16, 2006, to Sept. 16, 2008, when the company received its first bailout.
Judge Swain overruled an objection by two people who bought shares before the beginning of that period but who said they should be included in the class.
For the plaintiffs' lawyers' work, Judge Swain awarded the law firms Barrack, Rodos & Bacine and the Miller Law Firm $116.46 million in fees and more than $4 million in expenses.
Investors, led by the State of Michigan Retirement Systems, which oversees several state pension plans, accused AIG of failing to disclose the risks it took on through its portfolio of credit default swaps and a securities lending program. They said the failures had led investors to buy stock and debt they otherwise would not have bought, resulting in billions of dollars in losses.
