CVS Caremark, AIG pay a combined $310 million to settle decades-old securities fraud case
In 1998, investors filed more than 20 lawsuits alleging the Birmingham-based MedPartners mislead the public about its financial health.
CVS Caremark will pay $80 million and AIG insurance companies will pay $230 million as part of a class action settlement agreement approved Monday in Alabama over an alleged securities fraud case going back to 1990s involving MedPartners, the former name of Caremark Rx.
In 2000, MedPartners changed its name to Caremark Rx and in 2007, Caremark merged with CVS Health.
This $310 million settlement is among the largest fraud recoveries in Alabama legal history, according to the released statement.
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In 1998, investors filed more than 20 lawsuits alleging the Birmingham-based MedPartners, a physician practice management company, made false and misleading statements to the public about its financial condition and prospects.
The lawsuits were combined into a class action lawsuit representing 20,000 investors who purchased MedPartners securities from 1996 to 1998.
The original class action lawsuit was settled in 1999 for $56 million after MedPartners and its insurer, AIG, claimed MedPartners was teetering on the edge of bankruptcy and that $56 million exhausted the limits of its insurance coverage, according to the statement.
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In 2003, a new class action lawsuit was filed against MedPartners and AIG, for not disclosing the fact that in 1999, AIG provided unlimited insurance coverage to MedPartners for the 1998 securities-fraud lawsuits. The lawsuit claimed the company lied about how much it could pay to settle the lawsuits.
A trial was set to begin in early 2016, but was postponed as both sides worked out a settlement.
On August 15, the Alabama court granted final approval for the $310-million settlement.
"This class has waited patiently for more than 12 years for their investment losses to be recovered," said Scott Powell, attorney at Hare, Wynn, Newell & Newton and lead counsel. "They were victims of MedPartners stock fraud in the '90s and then were further cheated by the companies' hiding of its unlimited insurance policy."
Twitter: @SusanJMorse
