Time Warner Investor Suit Settlement OKd
Time Warner Inc. won approval Wednesday of a settlement of an investor lawsuit that a judge said would require the company to make changes in how it governs itself.
U.S. District Judge Shirley Wohl Kram gave final approval to the settlement of a 2002 suit that claims the directors of America Online and AOL Time Warner knew employees were violating accounting rules. The so-called derivative suit was filed against the company’s officers and directors.
Under the settlement, Time Warner agreed to designate an independent director as chairman of its nominating and governance committee. Within three years, two-thirds of the company’s directors will be independent, the settlement says.
These and other changes “may enhance investor confidence by ensuring that the company maintains a healthy governance structure,” Kram said in a ruling.
The suit was filed by investors on behalf of the company against directors and officers of America Online Inc. and AOL Time Warner Inc., now known as Time Warner. Investors claimed the directors knew or ignored signs that employees disregarded internal accounting and contracting policies. They said directors and senior officers breached their duty to shareholders.
Similar allegations led to a $2.5-billion settlement of a separate investor class-action lawsuit against the company. That suit alleged securities fraud.
The current settlement has two key parts: “extensive governance and compliance provisions at the board and management level,” and an acknowledgment by Time Warner that the suit was “a substantial factor” in the company’s ability to recover about $200 million from its director-and-officer insurers, Kram said. The money will fund the governance changes, the judge said.
Under the pact, lawyers for the investors will collect $9.6 million, which will come out of the $200-million insurance proceeds, according to court records.
Time Warner spokeswoman Susan Duffy and investor lawyer Patrick Morris didn’t return calls seeking comment. Time Warner continues to deny investors’ allegations of wrongdoing, according to court records.
