Scottish Re Group Limited Case 12/04/2006
According to an article dated November 5, 2007, a class action shareholder lawsuit filed against reinsurance company Scottish Re and its underwriters will stay alive, although not intact, after a judge partially granted and partially denied the company’s motion to dismiss the charges. In a ruling handed down on Friday, Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York issued a split verdict, agreeing to toss claims relating to Scottish Re accounting firm Ernst & Young, but denying the defendants’ bid to dismiss the entire securities fraud suit. Scheindlin dismissed two of the claims filed against E&Y on the grounds that the plantiffs had not adequately established scienter.
A consolidated complaint was filed on December 4, 2006. The individual defendants responded with a joint motion to dismiss the complaint on March 7, 2007 while third party defendants filed their motions one week later.
According to a press release dated August 3, 2006, the action against Scottish Re and certain of the Company’s executive officers charges violations of federal securities laws. On July 28, 2006, the Company’s Chief Executive resigned in the face of a shocking second quarter loss of $130 million. Scottish Re now states that it has suspended its dividends and hired investment bankers to track down additional capital. On this news, share prices have declined from $16.00 to $6.50 — erasing millions of dollars in shareholder value. These revelations were also in stark contrast to statements made by Scottish Re in February 2006, that the Company was operating at or above plan, and to statements made in early-May 2006, when the Company reported reduced earnings for the first quarter of 2006, yet failed to make any adjustments to its earnings or revenue forecasts.