BFTA Defeats Motion to Dismiss in GenworthMay 1, 2015
On May 1, 2015, U.S. District Judge James R. Spencer ruled that Plaintiffs sufficiently pled securities fraud claims against Genworth and its CEO and CFO.
Plaintiffs’ claims arise from Defendants’ repeated misrepresentations that they had conducted a four-month “intense, very broad and deep review of all aspects” of the Company’s long-term care insurance reserves. Their purported “deep review” culminated in a December 4, 2013 presentation to investors, during which Defendants assured shareholders that Genworth’s reserves were “adequate.”
In reality, Defendants had not conducted the represented review, and the Company had set its reserves using stale data from 2010 that they knew did not comport with reality. When the truth about Genworth’s 2013 reserve “review” was revealed, shareholders learned that Genworth’s reserves were under-reserved by over a half-billion dollars, causing the Company’s stock price to drop by 54%.
“Based on common sense and logic,” the Court held, ”Plaintiffs have adequately pled that Defendants’ statements regarding the scope of the review were intended to mislead investors and provide false assurances that based on all the information available to Defendants, Defendants were still confident in the adequacy of their reserves.”
Furthermore, the Court largely sustained Plaintiffs’ accusations that Defendants falsely certified that Genworth’s internal controls were adequate throughout the Class Period.
Bleichmar Fonti Tountas & Auld LLP serves as the Court-appointed Co-Lead Counsel on behalf of Co-Lead Plaintiff Her Majesty the Queen in Right of Alberta in In re Genworth Financial Inc. Securities Litigation, No. 3:14-cv-682 (E.D.Va.).
On December 22, 2014, Plaintiffs filed a consolidated securities fraud class action complaint (the “Complaint”) against Genworth and several Company executives on behalf of investors who purchased Genworth securities between October 30, 2013 and November 5, 2014, inclusive (the “Class Period”). On February 5, 2015, Defendants filed a Motion to Dismiss. Plaintiffs filed their Opposition on March 9, 2015. The Court heard oral argument on April 28, 2015 and sustained Plaintiffs’ Complaint on May 1, 2015.