The health care and insurance management firm Coventry Health Care Inc. recently agreed to pay $3.6 million to resolve a proposed class action accusing it of violating the Employee Retirement Income Security Act by concealing severe business setbacks from investors.
The proposed settlement resolves claims by a proposed class of the company’s current and former employees, who claimed they lost “millions of dollars of their hard-earned retirement savings” because the company and its directors continued to have the firm’s retirement savings plan invest in the company’s inflated stock. Coventry allegedly inflated its stock by hiding difficulties that its Medicare Private Fee-for-Service (PFFS) initiative was facing, which caused the company’s medical liability reserve calculations to be materially understated, according to court documents.
“The proposed settlement was reached after almost four years of hard-fought litigation and negotiation, including a full briefing and decision on defendants’ motion to dismiss, defendants’ motion to reconsider, plaintiffs’ motion to compel discovery and vigorous arms-length settlement discussions at two different mediations while discovery was ongoing,” the plaintiffs said in the settlement motion.
The first ERISA suit against Coventry in this dispute was brought in 2009 by Loretta Boyd and Christopher Sawney, after which subsequent suits by Coventry’s retirement plan participants were consolidated together.
Today’s proposed settlement resolves all claims in the consolidated suits by current and former employees who invested in company stock through their 401(k) plan between February 2007 and October 2008, and suffered losses as a result of their investment, according to the proposed settlement.
Coventry in May agreed to pay $10 million to resolve consolidated claims by open market investors in company stock, according to court documents.
That settlement, which was reached after more than a year of mediation and settlement negotiations, resolved claims that Coventry had failed to inform investors about problems with the same PFFS plan, leading to artificially inflated financial results, according to the New England Teamsters and Trucking Industry Pension Fund and the Southern California IBEW-NECA Pension Plan, the lead plaintiffs in that case.
The case is In re: Coventry Health Care Inc. Erisa Litigation, case number 8:09-cv-02661, in the U.S. District Court for the District of Maryland.
Categories: Class Actions of Interest