AOL (NYSE:AOL) hit with insider trading class action
Reuters, Monday, February 24, 1997 at 18:41
NEW YORK, Feb 24 (Reuter) - Two law firms filed a lawsuit
against America Online Inc on behalf of many shareholders,
chargng that 18 AOL officers, directors and outside accountants
violated U.S. securities laws.
The lawsuit, filed by Milberg Weiss and Morris and Morris,
alleges that 18 insiders named as defendants sold shares of AOL
at a profit before October, when the company announced losses
and a big charge for changes in its accounting practices. The
suit was filed in U.S. District Court for the Eastern District
of Virginia on behalf of purchasers of AOL's stock from August
10, 1995 to October 29, 1996.
The suit alleges that the 18 insiders "took advantage of
the artificial inflation in AOL's stock," which peaked at $71 a
share in May, 1996.
AOL had been deferring hundreds of millions of dollars in
subscriber acquisition costs, which the lawsuit says was
represented by AOL as certified by accountants Ernst & Young as
conforming with generally accepted accounting principles.
"It is now clear that AOL had never earned any profits and,
in fact, had been incurring huge operating losses in prior
years, rather than by June 1997 and instead of the profitable
growth forecast...in fiscal 1997," the suit said.
The suit said that AOL co-founder and chairman emeritus
James Kimsey sold 82 percent of his AOL stock -- 651,000 shares
at prices as high as $55-3/8 a share, for $24.5 million. AOL
co-founder, chairman and CEO Steve Case sold 76 percent of his
AOL stock -- 575,000 shares, at prices as high as $55 a share,
for a total of $29.1 million, the suit said.
Chief financial officer, Lennert Leader sold 66 percent of
his AOL stock -- 210,800 shares, at prices as high as $54 a
share, for a total of $10 million. Collectively, the 18 AOL
insiders sold 72 percent of their AOL holdings during the class
period, from August 10, 1995 to October 29, 1996.
Copyright 1997, Reuters News Service
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If this doesn't cause some alarm for shareholders I don't know what will.
-- George |
