AIG Settles Foreign Tax-Credit Suit for More Than $400 Million

American International Group Inc. settled a case involving cross-border transactions the government claimed amounted to improper tax shelters.

The insurer agreed to pay a 10% penalty and disallow more than $400 million in foreign tax credits as part of the long-running lawsuit, the acting U.S. attorney for the Southern District of New York said Friday in a statement.

The settlement resolves a U.S. investigation into the shelters, which prosecutors said allowed the insurer to generate phony foreign tax credits and reduce its U.S. taxes. AIG filed a suit in 2009 seeking a refund based on claimed credits for 1997. ...