Aon’s recent revelations of “financial irregularities,” while not in a class with Enron or WorldCom, have drawn the inevitable wolf pack to the scent of blood. Late last week two prominent law firms, specializing in class action recoveries, announced that they had filed lawsuits against the Chicago-based insurance broker.
The Little Rock Arkansas-based firm of Cauley Geller Bowman & Coates, LLP, and the Law Offices of Leo W. Desmond in West Palm Beach Florida both announced that they had filed class actions in the United States District Court for the Northern District of Illinois. The class is defined as persons who purchased Aon securities between May 4, 1999 and August 6, 2002.
Desmond’s announcement indicated that the case has been brought against “Aon Corporation, Patrick G. Ryan and Harvey N. Medvin,” and stated that, “It is alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10(b)(5) promulgated thereunder, by issuing a series of materially false and misleading statements to the market throughout the Class Period which statements had the effect of artificially inflating the market price of the Company’s securities.”
Cauley Geller’s announcement stated that, “The complaint charges Aon Corporation and certain of its officers and directors with issuing false and misleading statements concerning its business and financial condition. Specifically, the complaint alleges that defendants issued numerous statements and filed quarterly and annual reports with the SEC which described the Company’s earnings and financial performance. The complaint alleges that these statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (i) that the Company had materially overstated its net income by $27 million in 1999, by $24 million in 2000 and by $5 million in the first quarter of 2002; (ii) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (iii) that as a result, the value of the Company’s net income and financial results were materially overstated at all relevant times.”
Neither action has yet been certified as a class action by the court, and Aon has not yet commented on them, but it’s likely that the company will end up defending itself, or settling the actions for a significant amount.
Before the trial bar begins howling that they’ve been unfairly described as savage predators, some balancing is in order. While the regulatory authorities have been less than successful in curbing the fraud and deception wrought by greedy corporate officers and their accounting firm lackeys, one non-governmental institution remains steadfast in its efforts to sanction corporate wrongdoing – plaintiffs’ attorneys.
Sure they do it for money and sometimes they target the innocent, but most often they get it right. The threat of lawsuits from the victims of corporate fraud, represented by competent counsel, is a far greater inducement to avoid misbehavior than all the rhetoric coming from Congress, and the feckless posturing of the current administration.
If they didn’t exist, the U.S. would be far worse off, as most corporate shenanigans would be swept under the rug, as they are in much of the rest of the world. Don’t forget, however, that these lawyers are in business to make money, just like the insurance industry – a fact they too often forget. If given an opportunity they’ll take it. That’s why corporate honesty pays more in the long run than trying to cook the books. – CEB