Policyholders say MONY cheated them in IPO
Editor's note: A lawsuit contesting MONY's 1998 demutualization process has been dismissed. On May 1, 2001, a New York justice said the plaintiffs were provided with all of the information required by the conversion law and that they failed to show MONY violated any fiduciary duty. Claims against state Department of Insurance Superintendent Neil Levin, filed as part of the suit, also were dismissed.
Two policyholders have filed an amended lawsuit against the MONY Group, alleging that the New York insurer failed to fairly compensate policyholders in its initial public offering (IPO), or adequately inform them of its November 1998 plans to go public.
The lawsuit was originally filed in the fall of 1999 in federal court, but was re-filed March 27, 2000, in New York State Supreme Court in Manhattan by the law firm Milberg Weiss Bershad Hynes & Lerach LLP of New York on behalf of policyholders Calvin Chatlos of New Jersey and Alvin Clement of Texas.
|Policyholders "had no way of knowing whether the compensation being offered for their mutual rights was fair."|
Barry Weprin, an attorney for the plaintiffs, says that the suit was re-filed in state court because Neil Levin, New York's insurance superintendent, is also named in the suit. The suit claims that Levin did not adequately address policyholders' concerns over MONY's demutualization, which converted from a mutual company owned by policyholders to a public company owned by stockholders. In order to seek damages against Levin, the suit had to be filed under New York state jurisdiction.
The suit claims that a "closed block" of assets set aside for policyholders in the IPO was underfunded. A closed block assures policyholders that they will receive all benefits and dividends they would have received from a company if it were still mutually owned. The company also did not explain to policyholders how projected losses may affect the closed block or how the closed block would be affected by procedure or accounting changes that have been proposed by the National Association of Insurance Commissioners, according to the lawsuit.
The suit also alleges that when MONY sent policyholders an information packet about the demutualization in September 1998, the company asked them to vote on the demutualization plan without disclosing how much cash, stock, or policy credits they were due to receive. Thus, policyholders "had no way of knowing whether the compensation being offered for their mutual rights was fair," the suit says.
MONY told policyholders in the information packet that they would receive 40 million shares under the plan, but that number was later amended to 35.7 million shares, and policyholders were not informed about the change, the suit claims.
In a statement, MONY says the claims in the suit are "without merit." "[Levin], who has jurisdiction over these regulatory issues, has already provided a written decision that the plan of demutualization was fair and equitable to policyholders," MONY says. A spokesperson for Levin could not be reached for comment.