Shareholders are suing 18 America Online (AOL) executives, including chairman Steve Case, for alleged insider trading.
Two law firms in Virginia have bought a class action suit against AOL directors, officers and outside accountants on behalf of AOL shareholders. The online service provider said it has complied with all securities laws but would not comment further.
The suit claims Case and others used their knowledge to take advantage of the rise in AOL shares from mid-1995 to mid-1996. It goes on to say that Case then made $29.1 million and co-founder emeritus James Kimsey made $24.5 million from selling AOL stock and these sales damaged confidence, prompting AOL?s share price to plummet in autumn 1996.
The lawyers also claim AOL should not have deferred costs, nor told shareholders that its Internet service and browser, Global Network Navigator, made the company more attractive. Both these factors helped push AOL?s share price up in mid-1996. They add that AOL then decided to reorganise in October 1996, take the #385 million deferred cost, add a $75 million restructuring toll and drop Global Network Navigator, cutting share values by 80 per cent.
The move is another blow in a torrid year so far for AOL, which has suffered criticism and had legal action taken against it for slow access to its Internet service.
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