In re SCOR Holding (Switzerland) AG Securities Litigation (F/K/A In re Converium Holding)
SRKW acts as co-lead counsel in this securities fraud action against Switzerland-based Converium Holding AG (“Converium” or the “Company”) and Zurich Financial Services (“ZFS”). (Converium was acquired in 2007 by the French company Scor and is now known as SCOR Holding (Switzerland) AG).) Converium is a major multi-line re-insurance company that was spun off in an initial public offering by ZFS in 2001.
The Firm represents a large institutional investor appointed as a co-lead plaintiff in the action. SRKW and its client recently reached an historic settlement of the action valued at $145 million. Part of the settlement, on behalf of non-U.S. investors, will be reviewed and approved by the Amsterdam Court of Appeals under the Netherlands Act on Collective Settlement of Mass Damage Claims (the “Dutch Settlement”). The other part, on behalf of U.S. investors, has been preliminarily approved by the District Court for the Southern District of New York. The Dutch Settlement represents the first time a securities class action has been resolved in two different jurisdictions (the U.S. and the Netherlands). (In contrast, the Dutch portion of the settlement in the Royal Dutch Shell matter was brought on behalf of a group of institutions that had opted out of the class action.) In addition, before the settlement of the Converium/Scor action was reached, the U.S. court overseeing the class action had excluded European investors on jurisdictional grounds — nevertheless, SRKW and its co-counsel were still able to negotiate a substantial recovery for these investors through the Dutch Settlement.
The class action was initially brought on behalf of those who purchased Converium shares between December 11, 2001 and September 2, 2004 (the “Class Period”). The operative complaint alleges that prior to Converium’s December 11, 2001 IPO, an independent actuarial consulting firm identified a reserve deficiency of approximately $350 million at Converium’s North American division. Despite being informed of that deficiency, the Company proceeded with the IPO without sufficiently increasing its loss reserves. Thereafter, and throughout the Class Period, the Company and its senior officers touted Converium’s continuously improved financial condition while concealing a growing reserve deficiency in North America.
After a second independent actuarial consultant determined that the reserve deficiency had grown to approximately $437 million as of year-end 2002, the Company engaged in a scheme to conceal that deficiency by “novating,” or transferring, millions of dollars in poorly performing contracts from North America to Converium’s Zurich division, and by reorganizing the Company to no longer report financial results by geographic division. Ultimately, the Company was unable to continue concealing its reserve deficiency and, on July 20, 2004, announced that it would take a charge of at least $400 million to increase its reserves. That disclosure caused the price of Converium’s American Depositary Shares (“ADSs”), which traded on the New York Stock Exchange, to collapse by nearly 50%. Subsequent disclosures by the Company revealed that the charge would be more than $500 million, and this drove the price of Converium’s ADSs down further. On September 2, 2004, Standard & Poor’s announced a downgrade of the Company’s credit rating in response to the reserve increase. Shortly thereafter, Converium put its North American business into runoff.
After motions to dismiss were successfully defeated, plaintiffs proceeded with extensive document discovery, as well as numerous depositions in both the U.S. and Europe. On September 28, 2007, plaintiffs moved to certify a class of Converium investors both in the U.S. and abroad. On March 6, 2008, the Court certified a class of all persons who purchased Converium ADSs on the New York Stock Exchange, and all U.S. residents who purchased Converium shares on the SWX Swiss Stock Exchange, but held that it lacked subject matter jurisdiction over the claims of foreign investors who purchased shares on the SWX Swiss Stock Exchange. Such foreign investors were, therefore, excluded from the Class. Thereafter, plaintiffs moved the Court to reconsider its exclusion of foreign investors from the Class. In the interim, plaintiffs reached a settlement with all defendants, including the claims of the foreign investors excluded from the Class. On August 11, 2008, the Court preliminarily approved the settlements for the Class. A Final Approval hearing has been scheduled for December, 2008.
Details and relevant documents pertaining to the settlement are available at www.scorsecuritieslitigation.com.