AOL Time Warner Opt-Out Cases Starting to Settle

An article in today's New York Sun details the success garnered by one of the so called "opt-out" cases filed by institutional investors in the AOL Time Warner litigation.

The litigation was filed by the Alaska Department of Revenue, Alaska State Pension Investment Board, and the Alaska Permanent Fund Corporation on behalf of various Alaska state investment funds in the Superior Court of the State of Alaska - First Judicial District (Juneau).

According to the article:

Time Warner agreed this week to pay Alaska $50 million to compensate it for investment losses alleged to total about $60 million...That result, amounting to about 83 cents a dollar allegedly lost, appears to be far superior to the payout in the nationwide settlement, which has not been calculated officially but is likely to be a few cents on the dollar, according to lawyers involved in the litigation.

According to Richard M. Heimann, one of the attorneys for the Alaska pension funds:

Our settlement is far and away more than what we would have received - 50 times more than what we would have received if we had remained in the class.

A Reuters (via Forbes) article from the day the complaint was filed placed the losses of the Alaska pension funds at $70 million, but that still works out to 71 cents on the dollar.

The Alaska pension funds are represented by Lieff Cabraser Heimann & Bernstein, LLP and the Alaska Attorney General's office, and a copy of Alaska's complaint can be found here.

The article also notes that more than 100 institutional investors have opted out of the AOL Time Warner settlement and signed up with Lerach Coughlin Stoia Geller Rudman & Robbins LLP to pursue individual or group actions.

When "[a]sked if his clients will fare better than those who joined the national settlement, Mr. Lerach said, 'There's no question we're getting tons more dollars.'"

The Lerach firm has information on their website regarding a wave of opt-out cases they filed back in February 2006, here, including a list of plaintiffs (here) and a recording of Bill Lerach's conference call announcing the litigation (here).

The pension fund covered by the Alaska settlement include:

Alaska Department of Revenue funds:

1. The Constitutional Budget Reserve Fund;
2. The Public School Trust Fund;
3. The Power Cost Equalization Endowment Fund:
4. The Exxon Valdez Oil Spill Investment Fund;
5. The Retiree Health Insurance Fund - Major Medical;
6. The Retiree Health Insurance Fund - Longterm Care;
7. The University of Alaska, Investment Trust Fund; and
8. The Alaska Children’s Trust Fund.
   

Alaska State Pension Investment Board funds:

1. The Public Employees' Retirement System;
2. The Teachers' Retirement System;
3. The Judicial Retirement System;
4. The National Guard/Naval Militia Retirement Systems;
5. The Alaska Supplemental Annuity Plan; and
   
6. The Alaska Deferred Compensation Plan (employee directed accounts).
   

Alaska Permanent Fund Corporation funds:

1. The Alaska Permanent Fund; and
   
2. The Alaska Mental Health Trust Fund.
   

Daily Trivia: The Exxon Valdez Oil Spill Trustee Council, the organization tasked with the efficient restoration of the environment injured by the Exxon Valdez oil spill, manages the civil settlements paid by Exxon to the state and federal governments. According to the Council's investment policies, for the first 8 years, the Council was only allowed to invest in United States Treasury securities. But with the passage of Public Law 106-113 in 1999, the Council was permitted to invest in other assets, but:

such outside investments are limited to income-producing asset classes, including debt obligations, equity securities, and other instruments or securities that have been determined by unanimous vote of the Council to have a high degree of reliability and security.

That is a seemingly tough standard that nevertheless would not have prevented or prohibited many asset managers from investing in AOL, Enron, WorldCom, Fannie Mae, AIG, or other high-flying members of the S&P 500 that have suffered through scandals in the recent past.