NEW YORK, Oct. 25, 2005 (PRIMEZONE) -- Labaton Sucharow & Rudoff LLP ("Labaton Sucharow") filed an amended class action complaint yesterday in the United States District Court for the Eastern District of Virginia, on behalf of those who purchased or acquired the securities of Hilb Rogal & Hobbs Co. (NYSE:HRH) ("HRH" or the "Company") between August 11, 2000 and May 26, 2005, inclusive, (the "Class Period"). The lawsuit was filed against HRH and Andrew L. Rogal, Martin L. Vaughn III, Carolyn Jones, and Robert B. Lockhart ("Defendants").
Labaton Sucharow is engaged in an investigation into the Company's national and local-level contingent and override commission agreements. The complaint alleges that Defendants issued a series of false and misleading statements during the Class Period concerning the Company's growth and growth potential, while failing to disclose:
1. it had entered into secret agreements to limit competition by
steering clients to select insurers in return for substantial
contingent and/or override commissions;
2. that the amount contingent and override commissions HRH received
constituted a material portion of its net income during the
Class Period;
3. that the growing amount of contingent and/or override commissions
went straight to the Company's bottom line, and was a material
reason for the Company's reported growth in earnings;
4. its earnings were overstated because it failed to establish a
reserve for foreseeable losses associated with public revelation
of its illicit business practices;
5. it faced the material risk that a significant portion of its
revenues might be discontinued, and that it would be forced to
disgorge all or parts of the commissions to customers which
it had improperly obtained during the Class Period;
6. it faced the material risk that it could lose customers,
reputation, and goodwill upon the disclosure of its business
practices; and
7. it faced the material risk that it could be subject to substantial
legal costs, fines, penalties, claims for restitution, and damages
as a result of its business practices.
On October 14, 2004, the New York Attorney General's Office disclosed its investigation into HRH competitor Marsh & McLennan Companies, Inc. ("Marsh"), relating to the impropriety of industry practices surrounding contingent commissions. Because the October 14, 2004 news on Marsh implicated other insurance brokers and carriers and addressed the issue of contingent commissions generally in the insurance industry, the price of HRH stock fell 9.5% on this news, on heavy trading volume. But HRH falsely maintained that it was not engaged in practices comparable to Marsh's. In a conference call on October 27, 2004, Defendant Vaughan stated that HRH's business practices were distinct from those of Marsh, and that HRH had no special arrangements with insurance carriers and was not involved in bid-rigging. On February 2, 2005, however, the Company reported lower-than-expected financial results due, in part, to decreased contingent and/or override commissions and increased legal compliance and claims expenses. The price of HRH stock dropped 7.2% on this news, on heavy trading volume.
Finally, on May 26, 2005, the Company disclosed it had received improper payments in connection with the placement of insurance policies, and had terminated Defendant Lockhart as a result. On this news, the price of HRH stock fell 11% on heavy trading volume, causing the class significant damages. The Company has since been under investigation by the states of Florida, Massachusetts, California, North Carolina, New York and Connecticut, and at least another 10 states are conducting inquiries into the Company in connection with the practices described in the complaint, including fraud on customers and bid-manipulation.
A copy of the amended complaint can be viewed at: http://www.labaton.com/inbox/cases/23876.pdf. If you have any information pertinent to this investigation, please contact attorney Shelly Thompson at Labaton Sucharow at 800-321-0476.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca