Harrisburg, Pa. (Feb. 26, 2004) -- Big Four firm Ernst & Young is among several companies named in a lawsuit filed this week by the Pennsylvania Public School Employees’ Retirement System, the Pennsylvania State Employees’ Retirement System, the Tobacco Settlement Investment Board and the State Workers’ Insurance Fund.
The suit, filed Tuesday in a Philadelphia state court, seeks to recover losses against Time Warner Inc., its AOL Subsidiary, and other related parties, including E&Y, Morgan Stanley, Citigroup Global Markets Inc., Banc of America Securities and J.P. Morgan Chase & Co.
The funds claim combined losses in excess of $100 million that the complaint alleges were the result of financial and accounting violations, and false and misleading statements by the companies named about the financial results and operating condition of Time Warner and AOL before, during and after their January 2001 merger.
The suit alleges that some top Time Warner and AOL insiders pocketed over $1 billion in insider trading proceeds and other benefits by selling millions of their own Time Warner and America Online shares at artificially inflated prices before, during and soon after the $350 billion merger, and that outside accountants Ernst &Young and the defendant investment banks received tens of millions of dollars in fees.
According to the complaint, since the merger AOL Time Warner has restated approximately $190 million of revenues and approximately $97 million in earnings, and has said it may restate up to another $400 million of revenues.
In addition to damages, the funds want Time Warner and its AOL subsidiary put into place "certain corporate governance safeguards that will prevent such conduct in the future."
The funds are represented by the Philadelphia law Berger & Montague, which served as lead counsel in shareholder actions against Rite Aid, Sunbeam, Waste Management, and Arthur Andersen.
-- WebCPA staff
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