New York state Comptroller Alan Hevesi, the sole trustee of the state’s $100 billion retirement fund, will be the lead plaintiff in a securities class action lawsuit against Salomon Smith Barney.
The class action lawsuit was launched on behalf of investors who purchased WorldCom securities that were promoted by Salomon Smith Barney from April 1999 to June 2002.
The lawsuit alleges that Salomon Smith Barney and its former telecommunications analyst Jack Grubman were engaged in a misleading promotion of WorldCom securities during a period when WorldCom was engaging in the accounting violations.
Judge Gerard Lynch, of the United States District Court for the Southern District of New York ruled March 12 that Hevesi, and the New York State Common Retirement Fund, would be the lead plaintiffs in the case.
The decision is “an extremely important step in our effort to get justice for the nearly one million members of the New York State Pension Fund and the countless others who lost their hard earned savings,” Hevesi said. “These corporate officials who violated the public trust, at tremendous personal cost to untold families, must be held accountable. We must send a loud and clear message that corporate abuse of the public trust will not go unpunished.”
The state retirement fund was also appointed by another federal Judge to serve as lead plaintiff in a related securities class action against various WorldCom officers and directors, its auditors, underwriters and various others, including Salomon Smith Barney.
This suit claims that WorldCom engaged in accounting violations which overstated income and earnings on its financial statements. This artificially inflated the value of its securities.
The state retirement fund’s appointment as lead plaintiff allows officials in the comptroller’s office to take advantage of work they have already performed since the fund’s appointment in the WorldCom litigation.
The Comptrollers office filed a 162-page complaint in October 2002, and it has obtained a landmark decision granting the Common Retirement Fund access to several hundred thousand internal WorldCom documents. The retirement fund is currently engaged in Court order settlement negotiations with the defendants.
State officials estimate the retirement fund lost more than $300 million as a result of the alleged wrongdoing during the period identified in the lawsuit.
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