PWC reaches settlement with Ohio in AIG case

CHICAGO (Reuters) - PricewaterhouseCoopers, the independent auditor for American International Group (AIG.N), will pay $97.5 million to settle a class-action securities fraud lawsuit against the insurance giant and others, the Ohio state attorney general's office said on Friday.

The settlement is subject to approval by the U.S. District Court for the Southern District of New York, according to Chris Geidner, Ohio's principal assistant attorney general. The court may take the matter up in January 2009, Geidner said.

The suit was filed initially in 2004 and expanded in 2005, years before last month's U.S. government bailout of AIG, one of the key chapters in the continuing saga of the U.S. financial crisis.

The settlement with PricewaterhouseCoopers PWC.UL is "only a small part" of the larger case against main defendants AIG and its former Chief Executive Officer Hank Greenberg, said Geidner. Another defendant is General Re Corp, a unit of Berkshire Hathaway Inc (BRKa.N).

Warren Buffett, chairman and CEO of Berkshire Hathaway, said last week the conglomerate may buy AIG assets.

The district court has yet to rule on a motion to dismiss General Re from the suit.

Ohio sued AIG and the others in 2004 on behalf of three Ohio pension funds. The three funds are the lead plaintiffs in an action that includes all AIG shareholders from October 1999 to April 2005. The plaintiffs claim that AIG misstatements inflated the company's stock price and when the truth became known, AIG's share price plunged, said Geidner.

The suit was filed in 2004 after New York's attorney general at the time, Eliot Spitzer, investigated claims of illegal bid-rigging and other improprieties in the insurance industry.

In 2005, the suit was expanded to include claims of improper use of "finite" reinsurance by AIG, done in part as a way to inflate AIG's earnings.