Vague Media Reports Do Not Constitute Storm Warnings

The Hartford Financial Services Group Inc. thought it was off the hook when in July 2006 a district court in Connecticut granted the company's request to dismiss a securities fraud case a class of investors filed against it.

The investors, who filed suit in October 2004, accused the investment and insurance firm of inflating its stock price by concealing kickbacks, bid-rigging and price manipulation schemes by insurers and brokers.

Trigger Timing

At issue in Staehr v. The Hartford Financial Services Group Inc. was the nature of the media reports the defense relied on to build its case that the plaintiffs should have been on inquiry notice in 2001. The Hartford presented 17 news reports, 13 of which were from trade publications and the remaining four from the mainstream press.

Out of the 13 trade pieces, only one mentioned The Hartford by name, as did only one of the four mainstream stories. According to Judge Colleen McMahon, who wrote the appellate opinion, the articles were not enough to constitute a duty to inquire because an ordinary investor would not "have inferred that The Hartford was involved at all."

Technology Editor

Keith Ecker

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