A federal judge tossed out a lawsuit accusing MetLife and its executives of defrauding investors in accounting for its retirement and income solution line of business.
In a Jan. 11 decision, Judge Sterling Johnson Jr. of the Eastern District of New York found the claims "without merit." The resolution comes nearly three years after plaintiff Christopher Parchmann alleged violations of federal securities laws.
According to his complaint, Parchmann claimed that MetLife made misleading statements concerning amounts due under the insurer’s retirement group annuities program. MetLife disclosed in a Dec. 15, 2017, filing that it inadvertently failed to provide annuities payments to approximately 600,000 individuals.
In a follow-up filing Jan. 29, 2018, MetLife revealed that the issue was caused by a mistake in its annuities estimation procedure. The insurer wrongly determined that a group of still-living beneficiaries were deceased.
MetLife's plan to compensate the affected beneficiaries included increasing its reserves by $525-$575 million. The insurer's stock price dropped after the Dec. 15 and Jan. 29 disclosures.
'Significant Losses'
After the second disclosure, Parchmann said "shares of MetLife fell $6.28 per share or over 11.6% over the next two trading days to close at $47.67 per share on January 31, 2018, damaging investors," the complaint reads.
"As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common shares, Plaintiff and other Class members have suffered significant losses and damages," Parchmann's lawsuit said.
But in a March 1, 2018 filing, MetLife said the financial impact of the expected increased reserves was immaterial because of an unrelated coinciding accounting error that offset that increase. The insurer attributed the error to “operational failure” and “material weakness in internal control.”
The court ruled that MetLife had not commented on its 2017 profits or reserves prior to the stock price drop but rather merely stated in its December filing that it would provide further disclosure, the law firm Shearman & Sterling noted in a blog post.
Likewise, the judge determined that plaintiff could not prove that MetLife allegedly misstated its profits because of the coinciding accounting error which offset the increased reserves, the law firm added.
Although investors did not know of the coinciding accounting error, the Court held that “investors’ knowledge . . . is irrelevant to the factual falsity or truthfulness of the issuer’s statement.”
This article originally appeared on Insurance News Net.
