A pair of institutional shareholders is accusing AOL Time Warner Inc.'s
top executives of insider trading and attempting to inflate the company's share
lawsuit filed in California State Superior Court, the University of California and Amalgamated Bank's
Longview Collective Investment Fund are charging that AOL Time Warner's top brass worked
to jack up the company's share price, then sold their own stocks in
the company to benefit from it, according to reports.
The list of defendants includes chairman Steve Case, vice chairman Ted
Turner, CEO Dick Parsons, former CEO Gerald Levin, former chief operating officer Bob Pittman and
the company's former auditor, Ernst & Young LLP.
AOL Time Warner is not issuing any comment on the filing, according to a
In the filing, the two institutions claimed that just before AOL's merger with
Time Warner in January 2001, the executives used "tricks, contrivances and bogus
transactions" to inflate the company's stock value and then sold off their own
shares, benefiting to the tune of $936 million.
The lawsuit claimed that before the merger, Case, vice chairman Kenneth Novack
and Pittman worked to boost AOL Time Warner's share price by overstating Internet subscriber
numbers and inflating electronic-commerce-advertising revenues.
With the stock price high at the time the merger closed in January 2001, the
America Online Inc. and Time Warner Inc. executives then exercised a "change of control" proviso to
sell off millions of their stock-option shares on an accelerated basis.
During the next five months, the executives sold some 10.7 million shares
from their personal portfolios, even as they spent $1.3 billion of the company's
cash reserves to buy back 30.2 million shares on the open market, according to
After the merger, the company's stock free-fell from $58.51 to as low as
$8.60 per share, a loss of more than $500 million for the University of
California and Amalgamated Bank.
"The merger itself turns out to have been a contrivance intended to benefit
an unscrupulous few at the top of the corporate hierarchy," said Bruce Raynor,
Amalgamated Bank vice chairman, in a statement issued through the plaintiff's
legal counsel, Milberg Weiss Bershad Hynes & Lerach LLP.
The smarter way to stay on top of the multichannel video marketplace. Sign up below.
Thank you for signing up to Multichannel News. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.