The law firm of Cauley Geller Bowman & Coates, LLP reports that a class action has been filed in the United States District Court for the District of Minnesota on behalf of purchasers of The St. Paul Companies publicly traded securities during the period between Nov. 5, 2001 and July 9, 2002, inclusive (the “Class Period”).
The complaint charges The St. Paul Companies and certain of its officers and directors with reportedly issuing false and misleading statements concerning its business and financial condition. Specifically, the complaint alleges that defendants’ omissions and misleading statements concerning St. Paul’s exposure to asbestos claims liability caused St. Paul’s stock price to become artificially inflated, inflicting damages on investors. The Complaint alleges that during the Class Period, defendants failed to make adequate disclosures or take adequate reserves concerning litigation filed in 1993 in California state court known as Western MacArthur Co. et al. v. United States Fidelity & Guaranty Co., et al, Case No. 721595-7 (consolidated with Case No. 828101-2, Superior Court of California, Alameda County) (the “Western MacArthur litigation”).
The plaintiff claims that although trial of the Western MacArthur litigation commenced in approximately March 2002, the Company first disclosed the existence of the litigation on or about May 15, 2002, but did not disclose or quantify the amount or general magnitude of potential exposure to liability which St. Paul might suffer as a result of the litigation, nor did the Company increase its reserves at that time.
On June 3, 2002, the Company announced that a settlement had been reached whereby St. Paul would pay almost $1 billion to satisfy the claims reflected in the litigation, although the Company’s SEC filings stated that as of Dec. 31, 2001, the Company’s net reserves for asbestos claims was only $367 million. The Complaint charges that the Company tried to disguise the impact of the Western MacArthur litigation settlement by focusing on the alleged after-tax impact of the litigation and falsely claiming that $150 million of the litigation payments could be charged to the Company’s reserves, and that a subsequent SEC filing by the Company reflected St. Paul’s failure to take adequate reserves for its potential liability in the litigation.
News of the Western MacArthur litigation settlement caused the price of the Company’s stock to decline during the Class Period from a high of $49.20 on Nov. 5, 2001 to a low of $34.65 on July 9, 2002, the last day of the Class Period.
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