Thursday, March 19, 2009

AIG Spent Millions Pushing For Lawsuit Reform--Look Who's Getting "Reformed" Now

What goes around truly comes around. Or is it vice versa? You get the point-eventually the bully on the block gets his deserved thrashing.

For over twenty years, AIG has spent millions and millions lobbying for lawsuit or "tort" reform. Definition: laws that place limits or restrictions on what insurance companies have to pay in personal injury lawsuits. CEO Maurice Greenberg funneled millions into "thinktanks," ad campaigns, and lobbying to influence public opinion and pass tort reform legislation. We "trial lawyers" have been painted as the enemy.According to the AIG's of the world, limiting your rights was good for insurance companies, the economy, and American businesses. As Mark Wahlstrom from The Settlement Channel blog points out:

As anyone who has spent any time at all in the insurance industry knows, the "tort reform movement" was the brainchild and largely financed by AIG and other property casualty firms back in the 1980s when an artificial crisis in reinsurance was created to drive up pricing on excess/surplus and reinsurance coverages. When the companies saw how effectively they could pass along the blame for higher insurance costs on the supposedly run away verdicts and litigation costs in America to the trial lawyers, they devised the next stage in their plan. That was to move on a state and federal level to cap damages on all types of claims such as medical malpractice and work to limit punitive damage awards. The gambit has always been that any actuary can devise a profitable pricing on a line of insurance when they know that their upper limit on damages is capped in any fashion. It becomes a no lose profit making line of coverage when they know exactly what the upper limit is on a potential claim.

However, to get the legal and legislative cover to change laws, elect judges, run state wide referendums and pack the courts it takes money and lots of it. Enter AIG and all of the other major casualty companies who had the biggest stake in the game to get limits on damages, allow for preemption of state courts and strip citizens access to the courts. It may be lost to history the amount of money that was paid by AIG, it's political action committees, executives, agents and affiliates to fund state and federal tort reform measures, but you can only imagine the money spent from the mid to late 1980s until now.

Since that time, here is the shameful litany of AIG's recent shenanigans:

Early 2000's: target of a series of fraud investigations that ultimately led to the forced resignation of Maurice Greenberg, the company's CEO and Chairman for nearly 20 years;

2005-2006: An investigation initiated by New York's attorney general eventually resulted in a $1.6 billion fine ($1.15 after taxes) for AIG and criminal charges for some of its executives. The February 9, 2006 settlement resolved allegations that A.I.G. had participated in bid-rigging schemes and paid insurance brokers to steer business its way, used fraudulent insurance transactions to bolster the quality and quantity of its earnings and underreported to state insurance departments the amounts of workers' compensation premiums it had collected, on which it owed taxes. In 2005, it restated its financial results for five years beginning in 2000, a period when improper accounting inflated the company's earnings by more than $3 billion. (Gretchen Morgenson, "A.I.G. Apologizes and Agrees to a $1.64 Billion Settlement," New York Times, 2/10/2006).

2008: Greenberg's successor, Martin Sullivan, was forced to resign on June 15, 2008, after the company's stock began plunging after the company reported financial losses. On September 17, 2008, Sullivan's successor Robert B. Willumstad, Chairman of the Board of Directors of the Company since 2006, was quickly forced to step down and replaced by Edward M. Liddy, as one condition of a federal bailout of the firm


And all these questionable practices were occuring at roughly the same time AIG was investing in risky mortgage derivatives. Bottom line: at the same time AIG spent millions restricting injured persons' rights to sue "for the good of the economy" and relief for American businesses, it was a major force in collapsing and ruining our economy!

Has there been a more shining symbol of hypocrisy from an American business in recent memory? Remember the example of AIG the next time you hear groups like The Chamber Of Commerce lobbying for more lawsuit reform in order to "help our economy."

We now see where all that "lawsuit reform" and "help" for American business has gotten us.

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