Risk Management

Time Warner, Calpers in $118M Settlement

Like other major investors, the California pension giant opted out of the federal class action and landed a nine-figure settlement offer.
Stephen Taub and Dave CookMarch 15, 2007

The California Public Employees’ Retirement System announced that Time Warner has agreed to pay $117.7 million to settle a securities lawsuit regarding its former AOL unit.

After opting out of a federal class action, Calpers filed its own lawsuit in 2003 against Time Warner, several current and former officers and directors, Ernst & Young, and its financial advisors in the January 2001 merger with America Online.

The lawsuit alleged that AOL’s reported advertising revenue and income were overstated through the use of sham transactions and improper accounting practices, both before and after the merger. The combined company later restated more than $1 billion of revenue.

Los Angeles County Superior Court coordinated the litigation with suits filed by the Regents of the University of California, the California State Teachers’ Retirement System, Amalgamated Bank, the Los Angeles City Retirement Funds, and Franklin Funds. In February, Calstrs reached a $105 million settlement with Time, and last week, the company agreed to pay $144 million to settle charges brought on behalf of the Ohio Bureau of Workers’ Compensation and five pension funds.

The federal class action ultimately recouped a total of $2.65 billion for plaintiffs. However, the $117.7 million recovery for Calpers is about 17 times what it would have recovered from the class action, according to a statement by Calpers general counsel Peter Mixon. “We are pleased with the settlement,” he added.

The proposed deal covers all defendants except Ernst & Young, which is still a defendant in the action, according to the pension fund.