Thursday, April 10, 2008

Shareholders Sue Columbia Trustee-Linked PMI For Securities Exchange Act Violations

Columbia University Trustee Ann Kaplan is also a Professor of Finance at Columbia’s School of Business and both a member of Smith College’s board of trustees and the chair of the Smith College board’s investment committee in Massachusetts. In addition, Columbia University Trustee Kaplan sits on the board of directors of the Financial Guaranty Insurance Company [FGIC] next to certain officers and directors of the PMI Group Inc. (PMI), which has owned 42 percent of the stock of FGIC in recent years.

After PMI announced on March 3, 2008 that its U.S. Mortgage Insurance Operations had reported a net loss of $236 million in the fourth quarter, the value of a share of PMI stock dropped to $6.43, although its value during the Nov. 2, 2006 and March 3, 2008 period had once been as high as $50.07. So on April 3, 2008, the law firm of Schriffin Barroway Topaz & Kessler, LLP announced that a class action lawsuit against PMI on behalf of its shareholders was filed in the U.S. District Court for the Northern District of California.

According to the April 3, 2008 statement of Schriffin, Barroway, Topaz & Kessler, the Complaint “charges PMI and certain of its officers and directors with violations of the Securities Exchange Act of 1934” and alleges that the defendants “failed to disclose material adverse facts about” PMI’s “financial well-being, business relationships and prospects.” The lawsuit’s complaint also accuses PMI CEO and Chairman L. Stephen Smith, PMI Executive Vice-President David Katkov and PMI Chief Financial Officer Executive Officer and Executive Vice-President Donald Lofe Jr. of engaging in profitable insider trading in which they made millions by selling their own PMI stock at the same time they “materially misled the investing public, thereby inflating the price of PMI securities, by publicly issued false and misleading statements” about PMI’s actual financial condition.

Coincidentally, sitting next to Columbia University Trustee Kaplan on the FGIC board of directors are the defendants in this civil lawsuit: PMI CEO and Chairman L. Stephen Smith and PMI Chief Executive Officer and Executive Vice-President Donald Lofe Jr.. In addition, PMI Senior Vice President Patrick Mathis, PMI Group President Bradley Shuster and PMI Executive Vice President Arthur Slepian also sit on the FGIC board next to Columbia University Trustee Kaplan.

Next: PBS’s Historic Gannett Connection—Part 1