AIG May Be on the Hook in Lawsuits Against Goldman Sachs Board

By Bob Van Voris

April 24 (Bloomberg) -- American International Group Inc. may be required to pay to defend lawsuits against Goldman Sachs Group Inc.’s top executives, including Chairman and Chief Executive Officer Lloyd Blankfein, under directors and officers insurance policies held by the company.

AIG, which was rescued from collapse by the U.S. government, sold so-called Side A directors and officers’ coverage to New York-based Goldman Sachs, according to a person with knowledge of the policy. Goldman Sachs was sued last week by the U.S. Securities and Exchange Commission, which claimed it misled investors about collateralized debt obligations tied to subprime mortgages in 2007.

“If it were a derivative suit against Goldman, defense costs would be covered, and I’d prefer not to be a primary on the policy,” said John Degnan, vice chairman and chief operating officer of AIG competitor Chubb Corp., while answering a question about Goldman Sachs on an April 22 earnings call.

Goldman Sachs’s board and top management were sued by investors in two separate cases. The investors, Morton Spiegel and Robert Rosinek, said in complaints filed April 22 in New York State Supreme Court in Manhattan that Goldman Sachs officers and directors breached their duty to the company by permitting it to enter into a series of collateralized debt obligations tied to subprime mortgages.

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