AIG and Former Officers Opt for Private Multistep ADR in Accounting Cases (Web)
September 1, 2009
Some of the fight over the fate of American International Group Inc. is going to arbitration, and the proceedings will be private.
AIG; the insurer’s former CEO, Maurice R. Greenberg; and Howard Smith, a former AIG chief financial officer, filed a press release yesterday with the U.S. Securities & Exchange Commission announcing that they will use ADR to settle the claims in litigation over the former officers’ liability for accounting irregularities.
The filing was accompanied by the binding arbitration agreement, which can be found here.
The agreement takes some of the litigation out of the public courts and puts it in private, confidential processes. In a significant arbitration agreement provision, the parties agree that the only public document will be "the arbitrator’s final ruling and award."
“The parties have concluded that it is preferable to resolve as many of their disputes as possible in a private setting,” the press release states, “and in a more expeditious and cost-effective manner.”
According to the agreement, the parties will settle several cases that are pending in Delaware and New York. The terms of the arbitration agreement were made public on Aug. 31. The arbitration is scheduled to begin by Oct. 15, and end “no later than March 31, 2010,” the agreement states.
But it may not take that long. In the SEC filing, the parties also agreed to conduct settlement discussions before hearings begin. They leave open the possibility of bringing in a mediator.
The parties have decided to use a single arbitrator. Each party has agreed to submit a list of five proposed arbitrators by Sept. 15.
If the parties cannot agree on an arbitrator, JAMS, a private alternative dispute resolution provider based in Irvine, Calif., will appoint an arbitrator.
The arbitration will take place in New York City and will be governed by the American Arbitration Association’s Procedures for Large, Complex Commercial Disputes.
According to the agreement, the decision reached by the arbitrator will be “final, binding, and not appealable by any party in any manner whatsoever.”
The agreement notes that the parties will consider arbitrating several other pending cases also involved in the fallout over the accounting problems.
The parties' attorneys signed their arbitration agreement filing: David Boies, name partner at Boies, Schiller & Flexner, in Armonk, N.Y., on Greenberg's behalf; Daniel J. Kramer, a partner in New York's Paul, Weiss, Rifkind, Wharton & Garrison, on behalf of AIG, and for Smith, Vincent A. Sama, a partner in Winston & Strawn in New York.
A Reuters article on the arbitration agreement can be found here.