Cescato v Anthem Insurance, Inc., Goldman, Sachs & Co.
Lawyers Sue Over Insurance Company Buyout
Lawyers filed a class action lawsuit was filed on January 31, 2006, on behalf of former members of Anthem Insurance Companies, Inc. ("Anthem Insurance") who received cash compensation in or about December 2001 when Anthem Insurance converted from a mutual to a stock insurance company. The class action lawsuit alleges violations of the Securities Exchange Act of 1934 and Indiana statutes, breach of fiduciary duty and contract, unjust enrichment and negligence. The conversion occurred on November 2, 2001.
The lawsuit is pending in the United States District Court for the Southern District of Indiana, Indianapolis Division. The case has been assigned to Judge David F. Hamilton.
The suit alleges Defendants made material misrepresentations and omitted material facts in documents sent to members who approved the conversion. To raise the cash needed to compensate former members for their interests, Anthem stock was sold in an initial public offering ("IPO") on October 30, 2001. Defendants reduced the price at which the IPO shares would be offered in order to sell almost twice as many shares as had been represented would be sold, thus raising almost twice as much cash. Defendants then allegedly took advantage of the cash compensation default mechanism in the Plan of Conversion and prevented hundreds of thousands of members from becoming Anthem shareholders. Defendants allegedly devised the scheme to save costs and avoid complexities associated with a large shareholder population. Since the cash compensation paid to former members was tied to the allegedly depressed IPO share price, all former members who were paid cash are alleged to have received inadequate compensation. In addition, Anthem and Anthem Insurance allegedly misinformed former members that the entire cash compensation was taxable capital gain income.
