Fresh off multi-billion write downs, officials at two major financial services firms are being sued by shareholders alleging that they concealed heavy exposure to risky subprime mortgages.
A shareholder of insurer American International Group alleged in a court filing on Tuesday results were damaged by about $1.4 billion in losses in the company's investment portfolios and mortgage insurance business. Late Monday, another shareholder filed suit against Bear Stearns Cos, alleging that company officials were well aware of the impending crisis in the mortgage industry before credit markets plummeted in July.
Both suits were filed in U.S. District Court in Manhattan
Doris Staehr of California alleged that AIG improperly concealed exposure to subprime mortgages. Named in the suit were Chief Executive martin Sullivan and Chief Financial Officer Steven Bensigner.
Shareholder Samuel Cohen of Baltimore named as defendants Bear Stearns President Alan Schwartz, former President Warren Spector and Chief Financial Officer Sam Molinaro among 17 other officials.
Staehr seeks damages for breaches of fiduciary duty and waste of corporate assets by AIG's executives and directors as well as a directive that the company reform and improve its governance.
The Schwartz complaint seeks damages for the company, better governance, and a division between the chairman and chief executive jobs, among other demands.
Both complaints are derivative lawsuits, in which shareholders file suit on behalf of the company, with damages assessed are paid to the corporation instead of the shareholders directly.
On November 8, a shareholder sued Citigroup officials in a derivative lawsuit over subprime related losses.