TW, CalSTRS make deal on losses


SACRAMENTO  -- California's massive teacher pension fund has reached a $105 million settlement with Time Warner and former executives of AOL over claims that inflated prices for AOL stocks at the height of the Internet bubble cost the pension fund about $135 million.

The California State Teachers' Retirement System claimed in a lawsuit that former top executives and bankers with the Internet company artificially boosted the value of its stock around the time AOL bought Time Warner in 2000.

The deal is the second major settlement within weeks for CalSTRS, as the pension fund is commonly known. Officials last week revealed a nearly $47 million deal with Qwest Communications Inc. to settle a lawsuit over claims that Qwest's former executives committed accounting fraud.

In both cases, the nation's second largest public pension fund opted out of universal federal class action lawsuits in hopes of reaching better independent settlements.

Time Warner previously agreed to pay a combined $510 million to settle shareholder lawsuits and regulatory charges that AOL fraudulently inflated its online advertising revenues and subscriber counts.

"By opting out of the federal actions, CalSTRS was able to pursue California state law claims in a California state court, resulting in a timely and much bigger recovery," CalSTRS chief executive Jack Ehnes said in a statement.

Court documents showed that the deal was reached in December, but was not made public until Wednesday.

AOL's purchase of Time Warner eventually led to massive profit write-downs, shareholder lawsuits, regulatory scrutiny and a management purge. The company also took multibillion dollar write-downs and removed AOL from the beginning of its name.

Ed Adler, a spokesman for Time Warner, declined to comment on the agreement.

The settlement announced Wednesday also resolves claims against several banks and investment companies, but does not end the pension fund's claims against AOL accountants Ernst & Young LLP, the fund said.

With $157.8 billion in assets, the teacher pension fund is the second largest public employee retirement system in the nation, behind only the California Public Employees' Retirement System. It provides retirement, disability and retirement benefits to about 800,000 retired and current teachers.

Time Warner stock closed up 15 cents, at $21.76, on the New York Stock Exchange.