CalPERS Time Warner Suit Nets $117M Settlement

March 14, 2007 ( - The California Public Employees' Retirement System (CalPERS) announced that it has signed onto a $117.7 million settlement of a securities lawsuit brought against Time Warner.

The Time Warner suit charged that the defendants committed accounting irregularities in the company’s merger with America Online (AOL), which became effective in January 2001 (See  Time Warner OKs $400M Settlement with Opted Out Institutional Investors ). Named as defendants in addition to Time Warner were several of its present and former officers and directors, its accounting firm, Ernst & Young, and financial advisers.

Los Angeles County Superior Court coordinated the litigation with lawsuits also filed by the Regents of the University of California, California State Teachers’ Retirement System (CalSTRS), Amalgamated Bank, the Los Angeles City Retirement Funds and Franklin Funds.

According to the CalPERS announcement, fees and expenses will be deducted from the recovery before it receives the net amount.   Officials of CalPERS, the nation’s largest public pension program with $230 billion in assets, claimed their decision to step out of class-action litigation against Time Warner was validated.

“This recovery is very favorable to the beneficiaries of the pension fund and is approximately 17 times more than we would have recovered had CalPERS remained in the class action suit,” said Peter Mixon, CalPERS General Counsel, in the announcement. “We are pleased with the settlement.”

The CalPERS lawsuit alleged AOL’s reported advertising revenue and income were overstated through the use of sham transactions and improper accounting practices before and after the merger. There were federal investigations and the combined company later restated revenues on three occasions for a total of more than $1 billion.

The proposed settlement covers all defendants except the accounting firm Ernst & Young, still a defendant in the action, according to CalPERS.