The original complaint charges Hartford Financial and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Hartford Financial is a diversified insurance and financial services company. Through its subsidiaries, the Company provides investment products and life and property and casualty insurance to both individual and business customers in the United States and internationally.
The complaint alleges that during the Class Period defendants disseminated materially false and misleading financial statements. The true facts, which were known by each of the defendants but concealed from the investing public during the Class Period, were as follows: (a) that the Company was paying illegal and concealed "contingent commissions" pursuant to illegal "contingent commission agreements;" (b) that by concealing these "contingent commissions" and such "contingent commission agreements" the defendants violated applicable principles of fiduciary law, subjecting the Company to enormous fines and penalties totaling potentially tens, if not hundreds, of millions of dollars; and (c) that as a result, the Company's prior reported revenue and income was grossly overstated.
The complaint further alleges that on October 14, 2004, New York Attorney General Elliot Spitzer announced that he had charged several of the nation's largest insurance companies and the largest broker with bid rigging and pay-offs that he claimed violated fraud and competition laws. On these revelations, the Company's shares fell to $56 per share, a drop of 9%.
According to the Company’s FORM 10-Q for the quarterly period ended September 30, 2006, two securities class actions, now consolidated, have been filed in the United States District Court for the District of Connecticut alleging claims against the Company and certain of its executive officers under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5. The consolidated amended complaint alleges on behalf of a putative class of shareholders that the Company and the four named individual defendants, as control persons of the Company, failed to disclose to the investing public that The Hartford’s business and growth was predicated on the unlawful activity alleged in the NYAG Complaint. The class period alleged is August 6, 2003 through October 13, 2004, the day before the NYAG Complaint was filed. The complaint seeks damages and attorneys’ fees. Defendants filed a motion to dismiss in June 2005, and, on July 13, 2006, the district court granted the motion. The plaintiffs have noticed an appeal of the dismissal.
According to an article dated November 17, 2008, Hartford Financial Services Group Inc., the insurer that had a $2.63 billion third-quarter loss, must defend a lawsuit claiming it misled investors about its finances, a federal appeals court ruled today. The 2nd U.S. Circuit Court of Appeals reinstated a suit claiming Hartford and its top officers misled investors by not disclosing that the insurer paid kickbacks to brokers who provided business.
On February 2, 2009, Judge Christopher F. Droney ordered that the Clerk reopen the case in light of the mandate of the Second Circuit. On August 28, 2009, the plaintiff filed a Stipulation of Settlement. The proposed settlement is in the amount of $3,850,000 in cash. On September 17, 2009, the lead plaintiff filed a motion for preliminary approval of the settlement. On September 28, 2009, Judge Droney approved the motion. A Final Approval Hearing was scheduled for December 17, 2009. On December 23, 2009, Judge Droney approved the settlement, approved the plan of allocation and awarded attorneys’ fees and expenses. The Final Judgment and Order of Dismissal With Prejudice was entered the same day.