Shareholders have gone to court against UnumProvident Corp., charging that the disability insurer made misleading statements and improperly denied some claims to artificially inflate its stock price.
At least two complaints seeking class-action status have been filed since the company announced Feb. 5 that it had recorded investment losses of $93 million and was responding to a Securities and Exchange Commission investigation for information relating to its investment disclosures.
The complaints filed in federal court in Chattanooga allege that UnumProvident, president and CEO Harold Chandler and chief financial officer Robert C. Grieving inflated the price of the company’s securities to pursue an accelerated securities sale program.
”We find these complaints to be entirely without merit and we intend to defend these claims vigorously,” said Becky Bumgardner, a UnumProvident spokeswoman.
The complaints allege UnumProvident, the nation’s largest disability insurer, artificially inflated its stock price by failing to properly and promptly state losses to its investments and by improperly denying insurance claims.
”As with most securities suits, somebody told a lie,” said Sam Rudman, a partner of New York-based Cauley, Geller, Bowman, Coates and Rudman, one of the firms that has taken action in the case.
Chandler and Grieving ”knew that by concealing UnumProvident’s true financial results they could foster the perception in the business community that UnumProvident was a ‘growth company,’ ” according to the first complaint.
The second lawsuit also contends the company’s ”forward-looking statements” in financial disclosures aren’t protected from litigation because UnumProvident officials knew they were false.
The filings cover a period beginning May 7, 2001, after UnumProvident announced earnings of $147.6 million after-tax operating income.
The company’s stock rose $3.75 to reach $32.27 nine days later on the New York Stock Exchange. The day after the company announced its $93 million loss this month, shares closed at $14.45, a drop of 55 percent from the 2001 high. Shares of UnumProvident closed at $12.78 Tuesday.
UnumProvident, created by the 1999 merger of The Provident Companies of Chattanooga and the Unum Corp. in Portland, Maine, employs about 6,000.