Institutional Investors Vie For Lead in AOL Time Warner Suit

September 18, 2002 ( - In the latest signal that pension funds aren't taking investment losses lying down, institutional investors are lining up to sue AOL Time Warner for fraud that cost the funds money.

The Minnesota State Board of Investment, which oversees the state’s public employee pension fund, filed court papers this week, seeking lead plaintiff status in a class action suit against the media giant.  The Minnesota fund says the plunge in AOL Time Warner’s stock has cost the fund at least $249 million, which it believes represents “the largest financial interest” of any plaintiffs who have filed to recover losses, according to Dow Jones.

In the papers, filed in US District Court for the Southern District of New York, the board charged that AOL Time Warner made false and misleading statements about its ad revenue and misrepresented the benefits of the AOL merger with Time Warner.

Amalgamated Motion

On the same day, Amalgamated Bank’s Longview Fund filed a similar motion for lead plaintiff status, charging that AOL insiders artificially inflated the price of AOL Time Warner securities by knowingly issuing material misrepresentations about the company’s finances. 

Labor-owned Amalgamated says it has suffered a loss of approximately $56 million due to the massive drop in AOLTW stock price, which it claims is the largest single loss ever for the bank.  Amalgamated was one of the first institutional investors to file suit against Enron.

Minnesota’s alleged $249 million loss is less than half of 1% of the $50.8 billion fund. Still, the loss dwarfs the $20 million hit on its investment in Enron.

Loss Leaders
All told, shareholders lost more than $125 billion as AOLTW’s stock collapsed from over $50 to as low as $9.50 per share, according to Amalgamated.  Monday was the deadline for litigants seeking to be the lead plaintiff, the one in charge of managing and prosecuting a class action for plaintiffs across the country.

The Minnesota filing said at least 19 related cases, also seeking class action status against the company, have been filed in the New York court. Eighteen have been consolidated, while five more are pending in federal courts in Virginia and Texas.

Amalgamated notes that its suit was originally filed on July 18, 2002, by the law firm Milberg Weiss Bershad Hynes & Lerach LLP, lead counsel in the Enron shareholder litigation. That firm is currently continuing its investigation into AOLTW’s accounting practices, and intends to file additional detailed evidence of insider trading and accounting manipulations in the near future.

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