View this article online: https://www.insurancejournal.com/news/east/2006/12/11/74851.htm
The Pennsylvania state-workers’ retirement system said Friday it has settled for $93 million a class-action lawsuit against Cigna Corp. that accused the company and two of its senior executives of making misleading statements to drive up the stock price.
The deal requires approval from a federal judge, which is not expected to occur before April. The case had been scheduled for trial in March.
Wendell Potter, a spokesman for the Philadelphia-based insurance company, said it was not admitting any wrongdoing.
“There was a sudden drop in the stock price in late 2002, and some shareholders apparently felt that some issues had not been disclosed in accordance with securities laws,” Potter said.
The lead plaintiff was the Pennsylvania State Employees’ Retirement System, and payments from the settlement will benefit it and others who purchased Cigna stock from Nov. 2, 2001, through Oct. 24, 2002.
“The people who purchased the stock did not have all the material facts that they needed to make an investment decision,” said the retirement system’s lead attorney, Sherrie R. Savett, on Friday. She estimated that payments might be sent out sometime around spring 2008.
The lawsuit said Cigna officials made a series of “materially false and misleading statements” to investors, leaving a false impression about problems with a five-year, $1 billion-plus technology overhaul the company embarked upon in 1999.
“All of the defendants pursued a common goal … inflating the price of Cigna common stock by making false and misleading statements and concealing material adverse information,” the lawsuit stated.
Potter said that in retrospect, the company may have rushed into using some of its new technology.
“There were some bumps in the road during the initial phases of the rollout, but those problems were addressed very quickly,” he said.
Cigna said it will take a nonrecurring charge in the fourth quarter of about $25 million, which includes defense costs.
Savett said a memorandum of understanding has been signed but the parties still need to produce a full agreement that outlines all the deal’s terms. Cigna stock purchasers who qualify for it will be notified, and will be able to object to the settlement or can exclude themselves from it.