Chandler Insurance Company and Reliance Group Holdings are both defending lawsuits claiming shareholders were harmed by company actions that resulted in falling stock prices. Three civil lawsuits have been filed against Chandler Insurance Company, Ltd., Chandler (U.S.A.), and all of Chandler’s directors in early June.
The lawsuits, filed on behalf of three different plaintiffs in state district court in Oklahoma City, allege breach of fiduciary responsibility, and that plans announced June 1 to take Chandler private were detrimental to the public shareholders. The suits also request certification as class actions and that a temporary restraining order to prevent completion of the announced plan be placed by the court.
Late last month, the law firm of Wolf Haldenstein Adler Freeman & Herz LLP filed a class action suit on behalf of Reliance Group Holdings security purchasers who bought between Feb. 8, 1999, and May 10, 2000. The action is pending in U.S. District Court in New York.
Along with the company, Saul Steinberg, chief executive officer and director; Robert Steinberg, president and chief operating officer; Howard Steinberg, chief of corporate operations; and Lowell Freiberg, chief financial officer and director, are also named as defendants. The suit alleges that the defendants issued a series of material misrepresentations to the market between Feb. 8, 1999, and May 10, 2000.
The complaint alleges that on March 31, 1999, the defendants, in their financial statement filed with the SEC for fiscal year 1998 operations, claimed the company’s reinsurance contracts were valid, and recovery of the full amount of such coverage was expected. The lawsuit asserts that the company’s losses for that time period actually exceeded $150 million and the loss should have been reflected as a charge to income.
The suit goes on to assert that, in May, the company reported its first fiscal 2000 quarter would see an operating loss of $.31 per diluted share, representing a greater loss than the same quarter 1999. The company’s stock closed that day at $2.62, a decline of more than 40 percent from the period high of $11 per share.
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