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NEW YORKQuanta Capital Holdings Ltd. misled investors regarding the company's losses from Hurricanes Katrina and Rita in 2005, plaintiffs have charged in a securitieslawsuit.
Filed last week in U.S. district court in New York, the suit alleges that the Hamilton, Bermuda-based insurer and reinsurer released false prospectus statements in connection with a December 2005 offer of nearly 15 million common and preferred shares.
In the fourth quarter of 2005, Quanta estimated net losses of $68.5 million as a result of the hurricanes, but in March 2006, boosted the losses to $78.7 million. The news prompted Quanta's stock price to plunge nearly 40%, the suit alleges.
The suit names Quanta and a number of current and former management officials. They are: James J. Ritchie, chairman of the board; Jonathan J.R. Dodd, chief financial officer; Robert Lippincott III, deputy chairman of the board; and Michael J. Murphy, Nigel W. Morris, W Russell Ramsey and Wallace L. Timmeny, all former directors on Quanta's board.
In addition, the suit, which seeks class action status, names Arlington, Va.-based Friedman, Billings & Ramsey Ltd. and BB&T Capital Markets of Winston-Salem, N.C., as defendants for their role as underwriters of the stock offering.
The class includes buyers of Quanta's stock between Dec. 14, 2005, and March 2, 2006. There are potentially thousands of members in the proposed class, the suit states.
Calls to a New York-based spokesman for Quanta seeking comment were not returned.