HARRISBURG, PA  – Today the Pennsylvania Public School Employees’ Retirement System  (PSERS), the Pennsylvania State Employees’ Retirement System (SERS), the Tobacco Settlement Investment Board, and the State Workers’ Insurance Fund filed a complaint in the Court of Common Pleas for Philadelphia County to recover losses against Time Warner, Inc., its AOL Subsidiary, and other related parties, including Morgan Stanley, Citigroup Global Markets Inc., Banc of America Securities L.L.C., J.P. Morgan Chase & Co., and Ernst & Young LLP.  CLICK HERE FOR COPY OF THE COMPLAINT.

The Plaintiff Funds allege that Time Warner Inc., its AOL Subsidiary and other related parties engaged in financial and accounting violations, and issued a series of false and misleading statements concerning the business, financial results and operating condition of Time Warner and AOL before, during and after the January 2001 merger of these companies. The Funds allege that, as a result, they paid inflated prices for their AOL and Time Warner securities, and that the defendants violated federal securities laws and Pennsylvania law.  The Funds’ combined losses, resulting from this conduct, have been calculated to be in excess of $100 million.

Commenting on the filing, Pennsylvania State Treasurer and PSERS’ Chair Barbara Hafer and SERS Chairman Nicholas Maiale said:

“The Systems will aggressively pursue the recovery of asset losses resulting from the fraudulent actions of this company, its executives and other related parties. We have a responsibility to both our members and the Commonwealth taxpayers to prudently invest pension fund assets and defend the Systems’ assets against fraudulent actions. By taking this action, the Systems are making it clear we will not be passive victims of corporate fraud. 

We want not only to recover our losses in this case, but also deter other companies from illegal activity by sending a strong signal that we will consider legal action against any corporation whose executives seek to profit by defrauding their shareholders.”

In addition to damages, the complaint asks the Court to make Time Warner Inc. and its AOL Subsidiary put into place certain corporate governance safeguards that will prevent such conduct in the future.

The lawsuit alleges that following the 2001 merger, the defendants continued to mislead investors by misrepresenting the business, financial results and operating condition of the then-combined AOL Time Warner, all of which ultimately required the Company to restate and reverse hundreds of millions of dollars in revenues and earnings it previously recorded for the fiscal years 2000-2002.

To date, Time Warner has restated approximately $190 million of revenues and approximately $97 million in earnings, and has said it may restate up to another $400 million of revenues.  The ultimate amount of revenues and earnings Time Warner is required to restate may be much higher.

In addition, the suit alleges that certain top Time Warner and AOL insiders reaped for themselves over one billion dollars in insider trading proceeds and other benefits by selling millions of their own Time Warner and America Online shares at artificially inflated prices before, during and soon after the merger, and the defendant investment banks and Ernst &Young received tens of millions of dollars in fees. 

The case is pending before the Honorable Albert W. Sheppard, Jr. of the Common Pleas Court. The Funds are represented by Berger & Montague, P.C., a Philadelphia law firm, the Office of Attorney General, the Office of General Counsel and their own counsel.

About the Pennsylvania Public School Employees’ Retirement System

PSERS is the 14th largest public pension fund in the nation and the 21st largest among public and corporate pension funds in the nation. As of December 31, 2003 PSERS had over $47.3 billion in assets and a membership of more than 246,000 active school employees and 145,000 retirees. For more detailed information visit PSERS’ website at www.psers.state.pa.us.

About the Pennsylvania State Employees’ Retirement System
Established in 1923, SERS is one of the nation’s oldest and largest statewide retirement plans for public employees, with more than 197,000 members.  SERS is among the largest public and corporate pension funds, with assets of approximately $24 billion. For more detailed information visit SERS’ website at www.sers.state.pa.us.

About the State Workers' Insurance Fund
Established in 1915, SWIF provides workers' compensation insurance to Pennsylvania employers.  SWIF currently insures over 40,000 employers.  It has assets of approximately $1.5 billion.  For more detailed information about SWIF visit the Department of Labor and Industry website at www.dli.state.pa.us and enter the Keyword SWIF.

About the Tobacco Settlement Investment Board
TSIB was established pursuant to the Tobacco Settlement Act of June 26, 2001, and is charged with exclusive control and authority to manage, invest and reinvest money received by the Commonwealth of Pennsylvania pursuant to the Master Settlement Agreement entered into by the Commonwealth of Pennsylvania and leading United States tobacco product manufacturers. 

About Berger & Montague, P.C.
Berger & Montague is a Philadelphia law firm, consisting of approximately 60 attorneys and concentrates in representing institutional and other investors in complex securities litigation.  Over the past 30 years, Berger and Montague has recovered billions of dollars for investors and has served as lead counsel in shareholder actions against Rite Aid, Sotheby's, Sunbeam, Waste Management, Arthur Andersen, and many others.