An Alabama circuit judge has approved a $310 million settlement between American International Group Inc., (AIG), CVS Health Corp. and a class of investors who claimed Caremark Rx and the insurer defrauded investors when settling securities-fraud lawsuits in 1998. The class of 20,000 investors had claimed Caremark, then known as MedPartners Inc., and AIG told investors they could only afford to pay $56 million to settle several securities fraud lawsuits, when AIG was actually providing unlimited coverage. Jefferson County Circuit Judge Pat Ballard granted final approval to the settlement last month. AIG will pay $230 million and CVS $80 million in the settlement.
MedPartners changed its name to Caremark Rx in 2000, and then in 2007 merged with CVS. In 1998, MedPartners was hit with more than 20 securities fraud suits alleging the company lied about its financial condition and prospects, class counsel said. Those suits were then combined, and MedPartners paid out $56 million to settle the case. AIG had told investors they couldn’t afford to pay any more as MedPartners was facing bankruptcy. The instant suit was filed in 2003.
MedPartners had been run by Richard Scrushy, who was hit with a $2.8 billion judgement in 2009 for his alleged role in another fraud at HealthSouth. After he left HealthSouth, the company said Scrushy had hidden around $600 million in offshore bank accounts and wouldn’t help cover the judgment. Although Scrushy has denied any wrongdoing, a judge found him liable in a derivative shareholder suit after concluding that Scrushy participated in the accounting fraud and willfully breached his fiduciary duties as CEO of HealthSouth.
The investors are represented by Scott Powell (lead class counsel) , John Haley, Ralph Cook, Bruce McKee, Brian Vines and Tempe Smith who are with Hare, Wynn, Newell & Newton, a Birmingham firm, along with John Somerville of Somerville LLC and Tim Francis of Francis Law LLC. These lawyers did an outstanding job in this case, working for more than 12 years to bring it to a tremendous settlement.
Source: Birmingham News
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