View this article online: https://www.insurancejournal.com/news/international/2002/07/16/20394.htm
Hamilton, Bermuda-based Mutual Risk Management Ltd. (MRM) joined the ranks of companies facing charges of corporate mismanagement for allegedly providing misinformation that inflated the value of its stock.
A pending class action charges MRM with misleading investors about its business and financial condition according to the law firm of Schiffrin & Barroway, LLP.
The complaint was filed in the U.S. District Court for the Southern District of California. The plaintiff is seeking damages for violations of the federal securities laws on behalf of all investors who purchased Mutual Risk Management Ltd. securities.
The complaint alleges that Mutual Risk Management Ltd. and its most senior officers and directors disseminated materially false financial statements for each of Mutual Risk’s interim quarters during that period and for the years ended Dec. 31, 2000 and 2001, which materially overstated the Company’s cumulative revenues and its net income. As a result of the materially false and misleading statements and omissions described herein, Mutual Risk stock was reportedly inflated to an all-time high of $23.75 per share.
Mutual Risk also reportedly represented in each of its quarterly and annual filings with the SEC that the financial statements included therein had “been prepared in conformity with generally accepted accounting principles” and “reflected all adjustments necessary for a fair presentation of results for such periods.” In reality, each of Mutual Risk’s financial statements allegedly violated GAAP by understating reserves for potential claims. The financial results included in Mutual Risk’s SEC filings during the Class Period were thereby rendered materially false and misleading.
Then, on April 2, the Company reportedly admitted that even its disastrous fourth quarter 2001 results were not accurate, putting the Company’s shares into another “free fall,” trading at just pennies per share following the April 2, admission.