NU Online News Service, July 19, 12:25 p.m.EDT

American International Group agreed to pay $725 million to Ohioand Florida public pension plan funds in a securities class-actionsettlement to resolve bid-rigging allegations that the funds saidoccurred up to 2005.

The settlement brings total recovery for the pension funds tomore than $1 billion, Ohio's attorney general said.

Late Friday, the New York-based insurer said in a filing withthe Securities and Exchange Commission that it entered into thesettlement agreement where it will pay $175 million into an escrowaccount in 10 days. The remaining $550 million will be raisedthrough stock offerings prior to court approval. The company saidit could fund the remaining amount from "other sources" ifnecessary.

If the funds are not raised by the time of court approval of thesettlement, the plaintiffs will be free to terminate the agreement,acquire $550 million in AIG stock, or extend the period for AIG tocomplete the offering.

The suit, filed in U.S. District Court in the Southern Districtof New York, involved the Ohio Public Employees Retirement System,State Teachers Retirement System of Ohio, and Ohio Policy and FirePension Fund as the lead plaintiffs. They would later be joined bya group of Florida pension funds in a consolidated class-actionsuit.

The funds alleged that between Oct. 28, 1999 and April 1, 2005,AIG, current and former officers and directors of the company, C.V.Starr & Company, Starr International Company, GeneralReinsurance Corp., PricewaterhouseCoopers LLP, and others engagedin unethical conduct that led to a significant drop in the price ofits stock.

The groups were accused of engaging in "anti-competitive conductthrough the alleged payment of contingent commissions to brokersand participation in illegal bid-rigging"; concealing practices toinflate earnings; selling insurance instruments to other companiesdesigned to smooth income; and misleading investors about the scopeof government investigations.

In August of last year, former AIG Chief Executive OfficerMaurice "Hank" Greenberg, along with some other former AIGexecutives, C.V. Starr and Starr International, reached a $115million settlement with the Ohio plaintiffs(http://www.property-casualty.com/News/2009/8/Pages/Greenberg-Others-Settle-Civil-Suit-For-115M-AIG-Still-Targeted.aspx?k=greenberg+ohio).

In a statement, Ohio Attorney General Richard Cordray said thatwith the announced settlement Friday, the total expected recoveryis over $1 billion.

Besides Mr. Greenberg and AIG's settlement, Mr. Cordray said itobtained a $72 million settlement with General Reinsurance and$97.5 million from PricewaterhouseCoopers.

"This historic settlement is an excellent result for allshareholders harmed by AIG's misconduct, including Ohio's teachers,firefighters, police officers and public employees," said Mr.Cordray in a statement.

"Ohio is determined to send a strong message to the marketplacethat companies who don't play by the rules will pay a steep price,"he added.

The attorney general said the AIG case is the tenth-largestsecurities class-action settlement in United States history. Headded that this is the first and only billion-dollar class-actionsettlement since the financial crisis hit in 2008.

The settlement is still subject to court approval. No date hasbeen set for the hearing, a spokeswoman at the Ohio AttorneyGeneral's Office said.