LANSING, Mich. – The State of Michigan Retirement Systems lost money by investing in American International Group Inc., according to a report in the Detroit Free Press, and now the state will lead a lawsuit seeking “maximum recovery” of the pension funds.
State Treasurer Robert Kleine and Attorney General Mike Cox said that Michigan has been named lead plaintiff in a class action lawsuit against the firm, the report said. The retirement office invested in AIG on behalf of more than 600,000 public school employees, state police, state employees and Michigan judges and their beneficiaries, according to the Free Press.
AIG was heavily invested in credit default swaps, which are insurance-like contracts tied to sub-prime mortgage-backed securities and other risky debt, the article said. The lawsuit accuses AIG of illegally misleading investors about the scope and risks of those investments.
Kleine and Cox said Michigan will manage litigation on behalf of a class of AIG stock and bond purchasers, negotiate potential settlement terms and maximize recovery for the class, the Free Press reported.
The article did not detail the amount of the investment or any loss, but a press release issued by Cox’s office said that the retirement system holds combined assets of $60 billion and is one of the largest pension systems in the nation.
The release noted that Michigan also was named lead plaintiff in a national class action against Bear Stearns for nearly $62 million in losses to the retirement system and that Cox also has brought action against Tyco for $81 million in losses and HealthSouth for $33 million in losses, all to the state pension fund.
The Detroit Free Press, “Michigan is lead plaintiff in AIG securities case,” March 20, 2009
Office of the Attorney General, “Michigan to lead national suit against AIG,” March 20, 2009
Michigan Education Report, “It’s time to get serious about school employee pension reform,” Feb. 23, 2007