Accusations of fraud and improper accounting practices at AOL led to lawsuits against Time Warner in 2004 because of their effect on pension and investment funds in Pennsylvania.
Time Warner, AOL, and Big Four accounting firm Ernst & Young all have agreed to pay $23 million to settle claims that false and misleading statements about AOL’s finances had a negative impact on the financial well-being of several funds.
Several prominent investment banks, Morgan Stanley, Citigroup Global Markets Inc., Banc of America Securities and J.P. Morgan Chase & Co, found themselves cast as defendants in the suit as well.
Reuters reported how the state lawsuit accused Time Warner of greatly inflating reported revenue for AOL in the wake of the 2000 dot-com stock bust.
The defendants will pay $23 million to cover losses suffered by their investments in Time Warner stock. Pennsylvania Attorney General Tom Corbett broke down the settlement’s payouts on his website to the four funds that litigated the suit:
The lawsuit was filed on behalf of the Pennsylvania Public School Employees’ Retirement System (PSERS), the Pennsylvania State Employees’ Retirement System (SERS), the State Workers Insurance Fund and the Tobacco Settlement Investment Board. Each of the funds had invested in Time Warner.
The total settlement amount was allocated according to the loss incurred by each fund. After payments of fees and costs, PSERS will receive approximately $17.4 million; SERS will receive approximately $275,000; State Workers Insurance Fund will receive approximately $112, 000 and the Tobacco Settlement Investment Board will receive approximately $75,000. Payment of the settlement will be made to the funds within approximately one week.
Corbett also noted that the four funds opted out of a class action lawsuit against Time Warner in order to maximize what they could recover from the defendants.
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David Utter is a staff writer for Murdok covering technology and business.
