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Posted on 04/14/2003 9:10:57 AM PDT by Liz
NEW YORK (Reuters) - Two institutional shareholders said on Monday they filed suit against AOL Time Warner Inc. AOL.N , accusing Chairman Steve Case and other top executives of insider trading while using "tricks, contrivances and bogus transactions" to inflate the company's share price.
The University of California, which said it lost $450 million in its investment in the world's largest media company, and Amalgamated Bank's Longview Collective Investment Fund said in a statement they filed the suit in California state Superior Court in Los Angeles.
In addition to AOL Time Warner and Case, the lawsuit also names as defendants Vice Chairman Ted Turner, Chief Executive Officer Richard Parsons, former CEO Gerald Levin, and former Chief Operating Officer Bob Pittman.
The complaint alleges that the defendants reaped nearly $1 billion by selling shares while using "tricks, contrivances and bogus transactions" to inflate the company's shares, according to a statement issued by Milberg Weiss, the law firm representing the university and the bank.
Case, who had been sharply criticized by shareholders who were disappointed with the performance of AOL Time Warner, said in January he would resign in May so he would not become a distraction to the company.
Turner, the largest single shareholder of AOL Time Warner, is due to resign as vice chairman in May.
The suit claims that America Online's earnings from 2000 to 2001 were overstated by almost $1 billion, that it overstated subscribers to its Internet service, and that it inflated its e-commerce and advertising revenue to help secure its acquisition of Time Warner.
Executives at the company, purveyors of everything from Bugs Bunny to Madonna to Time Magazine, declined to comment.
AOL Time Warner shares have lost two-thirds of their value since the merger closed in January 2001, from the poor performance of its America Online Internet division and the cloud government investigations into its accounting.
The U.S. Securities and Exchange Commission believes the company improperly booked some of the about $400 million in advertising revenue it recognized as part of deals with Bertelsmann AG BERT.UL , AOL Time Warner disclosed last month in its annual report.
The company said at the time that it stood by its treatment of the deals.
In October, the company said it would restate results for a two-year period, cutting revenue by $190 million.
The suit also named the company's auditor, Ernst & Young. Executives from the accounting firm were not immediately available for comment.
The University of California and the Longview fund allege that AOL and Time Warner executives took advantage of the firms' January 2001 merger to cash in stock options on an accelerated basis. The merger, they said, triggered early vesting of 35 million stock option shares valued at $1.7 billion for the top five AOL executives alone.
"The University of California made a sound investment in a solid company when it invested heavily in Time Warner prior to its merger with AOL," David Russ, the university's treasurer, said in a statement. "The value of that investment was significantly impaired as a result of the merger."
The University of California said at the time of the merger it owned more than 11.3 million shares of Time Warner worth around $800 million and no shares of America Online. The school said it lost $450 million as a result of the AOL Time Warner deal.
The suit also named the AOL and Time Warner's financial advisers, Morgan Stanley MWD.N and Salomon Smith Barney and its parent, Citigroup Inc. C.N . Morgan Stanley declined to comment.
A Citigroup spokesman said he was familiar with the allegations against Salomon Smith Barney. "We believe the allegations to be without merit," he said.
Milberg Weiss last July filed a shareholder lawsuit in federal court in New York against AOL Time Warner, which named as defendants the company, Case, Parsons, Levin and Michael Kelly, another company executive.
Amalgamated's Longview fund, which frequently makes shareholder proposals on corporate governance issues, filed a motion in September to be lead plaintiff in that suit, which accused AOL Time Warner of illegal accounting practices and alleged that executives artificially inflated the price of the company's stock.
Officials at Amalgamated and at Milberg Weiss were not immediately available to comment on Monday.
As of March 25, AOL Time Warner said that 30 shareholder suits have been filed against it and certain current and former executives. The company has said it intends to defend itself vigorously against these suits.
AOL Time Warner shares rose 14 cents to $12.44 at midday on Monday on the New York Stock Exchange.
Not philanthropic Ted Turnip? Please, say it isn't so.
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FreeRepublic , LLC PO BOX 9771 FRESNO, CA 93794
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It is in the breaking news sidebar! |
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The only executive more terrible than Steve Case is Michael Dell. Dell's F- customer service is a joke. Good product; awful service.
Does this mean we'll lose Cartoon Network, Ted?
Say it isnt so!
Cheers.
Lookie here. Calpers is really in the news today.
(Burbank Karl, have I got a link for you. See below.)
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