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Aetna Sued for Info on Political Contributions

MANHATTAN (CN) - Aetna made misleading proxy statements in 2012 and 2013 to get shareholders to reject resolutions demanding more information about the company's political contributions, a shareholder claims in court.

Stephen W. Silberstein sued Aetna, its CEO Mark Bertolini and its board of directors, in Federal Court.

The first resolution was presented in 2012 by the Service Employees International Union Master Trust. The resolution asked the company to come up with a way of disclosing indirect political contributions and expenditures. It also asked the board to come up with a policy of its own regarding disclosure.

Bertolini signed a letter accompanying the proxy statement, "specifically asking shareholders to vote their shares promptly," the complaint states.

A similar resolution was presented in 2013 by the Unitarian Universalist Association of Congregations. Bertolini wrote another letter asking for its rejection.

The company encouraged shareholders to vote against the resolution, but claimed that "transparency and accountability with respect to political expenditures are important," according to the lawsuit.

Silberstein claims that Aetna's so-called "transparency" about its political contributions, on its website, is a farce.

The Aetna website "provided no definition of 'Associations, Coalitions and Other Groups,' and offered no explanation as to who recommended and/or approved expenditures of corporate funds to these organizations," the complaint states.

According to the statement on the Aetna website, "the Board reviewed only that information included in the Political Contribution Reports. Therefore, the Board, like the public, remained in the dark about all contributions not specifically listed in the reports, including those made to the unnamed 'coalitions and other groups,'" Silberstein says in the complaint.

The 2013 resolution sought to assign the board responsibility for "formulating and revising the policy, and (b) establishing parameters of Aetna's commitment to disclosing its political expenditures."

The board recommended voting against the proposal, claiming that "the company is an active participant in the political process at all levels of government and seeks to promote political interests that are aligned with the business interests of the company, its shareholders and its members. Given the importance of this issue to the company, the company recently expanded the information available on its website about its policies and procedures regarding political contributions and the related oversight of those activities."

That's not enough, Silberstein says.

In 2011, Aetna listed contributions of $100,000 to the Republican Governors Association and the Democratic Governors Association. But the IRS tax forms filed by the governors associations claim that Aetna gave each of them more than three times as much, according to the lawsuit.

"As groups organized under section 527 of the Tax Code, the RGA and the DGA are required to reveal their donors," the complaint states. "According to the RGA's IRS form 8872, in 2011 Aetna contributed $350,000 to the group. Similarly, the DGA's IRS form 8872 indicates that in 2011 it received $350,250 in contributions from Aetna subsidiary Aetna Schaller Anderson."

Silberstein claims that that these incorrect 2011 disclosures are not "one-time errors." He claims that Aetna also failed to disclose donations to the governors associations in 2006, 2007, 2008, 2009, and 2010.

In 2011, Aetna disclosed in a footnote a $4 million payment to the U.S. Chamber of Commerce for "voter education initiatives." That year, the Chamber of Commerce bought attack ads against members of Congress up for re-election in 2012 in Ohio, Iowa, Montana, Washington, Pennsylvania, and Nevada.

One ad targeted Congressman Sherrod Brown, an Ohio Democrat. The ad claimed that "Brown voted to block energy production and increase energy taxes," though PolitiFact "found the claims in both advertisements mostly false," according to the complaint.

Aetna also failed to disclose its $3.3 million contribution to the American Action Network, a 501(c)(4) organization headed by former Sen. Norm Coleman, Republican of Minnesota. That group in 2012 launched a $1.2 million campaign seeking repeal of the Affordable Care Act.

"Aetna's failure to disclosure the contributions to the RGA, DGA, and AAN, and its inaccurate explanation for its contribution to the Chamber of Commerce, makes it likely Aetna has made other contributions it also has failed to disclosure," the complaint states. Since neither AAN nor the Chamber of Commerce are required to, or do reveal, the identities of their donors, Silberstein says it's impossible to confirm the accuracy of Aetna's "partial, accidental disclosures."

Silberstein claims that organizations such as the ones mentioned above "use contributed funds for overtly political purposes such as running vitriolic political advertisements urging voters to cast votes against particular candidates."

He wants the votes rejecting the 2012 and 2013 shareholder resolutions voided, the resolutions resubmitted at the 2014 shareholders meeting, and Aetna's board of directors ordered to amend its political contribution reports for 2006 through 2012 "to provide full and accurate information regarding all of the company's political contributions."

Silberstein is represented by Melanie Sloan, with of Citizens for Responsibility and Ethics in Washington, in Washington, D.C.

Aetna spokeswoman Cynthia Michener said in a statement today: "We intend to vigorously defend against this lawsuit. Aetna meets or exceeds disclosure requirements of current laws and regulation."

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