An Alabama Circuit Court Judge granted final approval to a $310 million class action settlement that seeks to rectify a fraud committed against more than 20,000 individuals, entities and pension plans who owned stock in MedPartners, Inc., in the late 1990s.
MedPartners changed its name in 2000 to Caremark Rx and merged with CVS Health in 2007. The lawsuit claims that Birmingham-based MedPartners, Inc., a physician practice management company, lied to its shareholders about how much the company could pay to settle securities-fraud lawsuits in 1999.
The class is made up of investors who purchased MedPartners securities from 1996-1998. The plaintiffs serving as representatives of the class include the City of Birmingham Retirement and Relief System.
According to a news release from the law firm Hare, Wynn, Newell & Newton, more than 20 securities-fraud lawsuits were filed by investors in 1998 against MedPartners. Those lawsuits alleged that MedPartners made false and misleading statements to the public about its financial condition and prospects. The lawsuits were combined and settled in 1999 for $56 million after MedPartners and its insurer, AIG, claimed MedPartners was teetering on the edge of bankruptcy and that $56 million exhausted the limits of its insurance coverage.
In 2003, a new class action lawsuit was filed against MedPartners (Caremark) and AIG for not disclosing the true fact that in 1999, AIG provided unlimited insurance coverage to MedPartners for the 1998 securities-fraud lawsuits. This claim alleged that Caremark and AIG committed fraud in the 1999 settlement.In 2011, CVS Caremark Corp. agreed to pay nearly $20 million to settle three lawsuits involving allegations that the company defrauded pension systems in three states. Those lawsuits contained different allegations against the company than the Alabama case.