HARRISBURG Time Warner is named in lawsuit
The suit alleges that company insiders made more than $1 billion.
HARRISBURG (AP) -- Pennsylvania sued Time Warner Inc. and its AOL subsidiary last Tuesday, contending that the companies misled investors about their financial health, causing some of the state's largest public investment funds to lose at least $100 million.
The state, including its two largest public-employee retirement systems with more than $70 billion in investments, got in line with several others, including Ohio, Minnesota, West Virginia and California, in accusing the company of misdeeds.
Pennsylvania's allegations centered around the companies' statements before, during and after their $106 billion merger three years ago that brought together the world's largest Internet provider and the world's largest media company.
In state court
The lawsuit was filed in state court in Philadelphia on behalf of the Public School Employees' Retirement System, the State Employees' Retirement System, the Tobacco Settlement Investment Board, and the State Workers' Insurance Fund.
In a group statement, Barbara Hafer, the state treasurer who chairs the PSERS board, and Nicholas Maiale, who chairs the SERS board, said the systems "will not be passive victims of corporate fraud."
A Time Warner spokeswoman, Tricia Primrose, declined to respond, saying the company does not comment on pending litigation.
The company said in 2002 that the Justice Department had begun looking into its accounting practices, after securities regulators were already investigating the company's bookkeeping.
The suit also names "related parties" that include accounting firm Ernst & amp; Young and investment banks Morgan Stanley, Citigroup Global Markets Inc., Banc of America Securities and J.P. Morgan Chase & amp; Co.
Allegation
The suit alleges that company insiders made more than $1 billion, in part by selling stock at artificially inflated prices. Ernst & amp; Young and the investment banks named in the suit received "tens of millions of dollars in fees," the group statement said.
After the January 2001 merger, the company's stock traded as high as $58.51 before falling below $9. Shares on the New York Stock Exchange now hover around $18. In trading Tuesday, shares fell 22 cents to close at $17.30.