Citing a memo to US District Judge Alison Nathan in Manhattan, Bloomberg reported that New York Attorney General Eric Schneiderman is requesting for a dismissal of a lawsuit filed by American International Group Inc against the Department of Financial Services and its its superintendent, Benjamin Lawsky. Schneiderman argued that the lawsuit, which complains about the current state law on selling insurance overseas as unconstitutional, was a tactic by AIG in order to interfere the regulator's probe on the company on unlicensed insurance sales abroad.

"The investigation of AIG is not complete, and it remains to be seen what statutory violations, if any, would be charged," Schneiderman said in the memo.

The New York-based company said in its lawsuit that it is contesting the potential fines it would receive from selling overseas insurance as the state law violated its free-speech rights and discriminates out-of-state commerce.

The legal battle between Lawsky and AIG started with a March 31 consent order signed by the DFS superintendent with MetLife Co, which indicate that former AIG life insurance unit, American Life Insurance Co and Delaware American Life Insurance Co had violated insurance regulations by conducting its marketing operations from New York of its group life, disability and medical insurance to companies with its overseas counterpart without a state license. AIG was later sold Alico and DelAm to MetLife in 2010, Bloomberg said.

Lawsky's agency also said in the same order that Alico had made omissions and misrepresentations about its insurance businesses to the New York Insurance Department, which is DFS' predecessor. Moreover, DFS said that Alico is aware that unlicensed insurance companies can only perform back-office functions within the state.

As a result of the probe, MetLife agreed to cough up $60 to resolve its part. $50 million would reportedly go to DFS and the remaining amount to the office of Manhattan District Attorney Cyrus R. Vance Jr.