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Ohio Pension Funds Settle $175 Million Securities Fraud Case with AOL / Time Warner

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The Ohio Attorney General Marc Dann announced a settlement reached between Time Warner and a number of Ohio pension funds in the amount of $175 Million for claims arising from the losses suffered by these Ohio funds after the AOL Time Warner merger in 2001. The lawsuit alleged securities fraud and claimed that AOL inflated its stock price before the deal by misrepresenting sales, revenue and subscriber figures. Claims against Ernst and Young who handled the accounting of the deal remain pending.

The Ohio AG elected to opt out of the class action settlement previously reached and to have the Ohio funds stand on their own in the litigation. In some instances this makes better sense for large institutional investors which are victims of securities fraud where damages are substantial. The typical investor would generally elect not to opt out of a class action as the recovery being sought would not generally outweigh the cost of pursuing an individual action. In this case Ohio’s losses were substantial.

Five state pension funds and the Ohio Bureau of Workers’ Compensation will receive a combined $144 million as part of a settlement with Time Warner Inc. over claims of securities fraud.

The balance will go to fees and expenses in obtaining the recovery.

The bulk of the settlement will go to the State Teachers Retirement System of Ohio and the Ohio Public Employees Retirement System. The system provides pensions and health care benefits for 700,000 active members and 200,000 retirees and their beneficiaries.