Hartford Financial Tops Shareholder Litigation WatchList
Audit Integrity has updated its list of companies it sees as most at risk from shareholder litigation.
Topping the list is Hartford Financial Services (NYSE: HIG), with a 6.4% chance of litigation in the next 12 months, followed by BJ’s Wholesale Club (NYSE: BJ) with a 2.7% chance. Standard & Poor’s on Jun 15 raised its Outlook for Hartford to Stable from Negative after the multi-line insurer issued $3.4 billion in senior preferred stock as part of the U.S. Treasury Department’s Capital Purchase Program.
Audit Integrity’s Litigation WatchList is based on multiple criteria. Every company must have a Litigation Model Ranking of 1 or 2, with a 1 year Litigation Probability equal to or greater than 1%. In addition to Litigation Model Ranking and Probability, companies are added to the Litigation WatchList based on a stock drop (as defined by 4 week trailing returns of ‐10% or greater) AND one or more of the five following High Risk Events:
- Insider Selling amounting to at least .1% of total assets
- Negative Earnings Surprise (including revised forecasts)
- Officer/Director change involving the CEO or CFO
- Accounting Issues
- *mended/Late Filings
The Litigation WatchList represents companies which, in our judgment, have not been recognized by the larger marketplace as having high potential for litigation.
Audit Integrity also notes that K-V Pharmaceuticals Co. (NYSE: KV.A) is in receipt of an informal inquiry by the SEC. The company is also responding to requests for information from the Office of the United States Attorney for the Eastern District of Missouri and FDA representatives working with that office. In addition, the company faces a series of putative class action shareholder lawsuits alleging violations of the federal securities laws by the Company and certain individuals, and lawsuits alleging violations under the Employee Retirement Income Security Act (ERISA). K-V is rated “Very Aggressive” in its corporate governance practices by Audit Integrity.
After the controversial departure of KV’s CEO in December 2008, Adam Greene, an analyst at Stanford Group in New York, wrote in a report that he thinks “KV’s governance situation may remain messy for a while.”
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