According to the firm's 10-K filing for the fiscal year ended December 31,2000, on January 4, 2001, the Court entered an order granting final approval to a settlement of the action. Under the terms of the settlement, which does not involve any admission of wrongdoing, former Aetna and its insurance carriers paid a total of approximately $83 million into a settlement fund, which will be used to pay claims submitted by members of the class certified by the Court and to pay fees of the plaintiffs' attorneys. A substantial portion of the settlement was covered by insurance, but the
Company's earnings for the year ended December 31, 2000, reflected an after-tax
charge of approximately $5 million to cover its share of the settlement.
As reported by the Company’s Form 10-Q for the quarter ended September 30, 2000, on November 5, 1997 by Eileen Herskowitz and Michael Wolin, and on December 4, 1997 by Pamela Goodman and Michael J. Oring. Other Class Action Complaints were filed in the United States District Court for the District of Connecticut on November 25, 1997 by Evelyn Silvert; on November 26, 1997 by the Rainbow Fund, Inc.; and on December 24, 1997 by Terry B. Cohen. The Connecticut actions were transferred to the United States District Court for the Eastern District of Pennsylvania (the "Court") for consolidated pretrial proceedings with the cases pending there. The plaintiffs filed a Consolidated and Amended Complaint (the "Complaint") seeking, among other remedies, unspecified damages resulting from defendants' alleged violations of federal securities laws. The Complaint alleged that the Company and three of its current or former officers or directors are liable for certain misrepresentations and omissions regarding, among other matters, the integration of the merger with U.S. Healthcare and the Company's medical claim reserves. The Company and the individual defendants filed a motion to dismiss the Complaint on July 31, 1998. On February 2, 1999, the Court dismissed the Complaint, but granted the plaintiffs leave to file a second amended complaint. On February 22, 1999, the plaintiffs filed a second amended complaint against the Company, Ronald E. Compton and Richard L. Huber. The Company and the remaining individual defendants filed a motion to dismiss the second amended complaint, and the Court denied that motion in March 1999. On August 9, 1999, the Court entered an order certifying as plaintiffs those persons who purchased Company common stock on the market from March 6, 1997 through 7:00 a.m. on September 29, 1997. Merits discovery was completed in early 2000. On January 31, 2000 plaintiffs filed expert reports. On February 3, 2000, defendants filed motions for summary judgment. Also on February 3, 2000, plaintiffs moved for permission to file a third amended complaint. On March 20, 2000, the Court granted plaintiffs leave to file a third amended complaint and adopted a revised schedule. Pursuant to the revised schedule, defendants filed new summary judgment motions in May 2000 and the parties conducted expert discovery which was completed in the third quarter of 2000. Trial was scheduled to begin in the fourth quarter of 2000. On October 5, 2000, the Court entered an order granting preliminary approval to a settlement of the action.
The original complaint charges Aetna and certain of its officers with violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934. According to the complaint, during the Class Period, defendants disseminated numerous announcements concerning the successful integration of U.S. Healthcare, and its corresponding positive effect on the financial results of the company. Plaintiffs allege that these public statements were materially false and misleading because they failed to disclose the company's claims backlog and inadequate reserve for medical claims, due to problems arising out of the integration of U.S. Healthcare and the negative impact on Aetna's earnings.