Class Action Survives Against MoneyGram

     (CN) – A class action against MoneyGram International will proceed after U.S. District Judge David Doty denied its motion to dismiss allegations of securities fraud because the plaintiffs failed to assert a primary violation.

     In the October 2008 amended complaint in Minneapolis, the Oklahoma Teachers’ Retirement System claimed that Jan. 24, 2007 and Jan. 14, 2008 MoneyGram’s officers falsified financial statements to sell its stock at an inflated price while the market collapsed due to the subprime mortgage crisis.
     Shareholders claim MoneyGram CFO David Parrin stated that mortgage-backed securities had little effect on the company’s portfolio, though plaintiffs say MoneyGram “eventually recognized $1.2 billion in unrealized losses for 2007.”
     At the date of the amended filing, MoneyGram’s stock price was $1.41 per share, down from $22 in the previous year.     
     Judge Doty recognized that the complaint did not adequately claim violations of General Accepted Accounting Principles in MoneyGram’s failure to reveal omissions, impairments or risks with its securities. But he ruled that “a reasonable investor may have been misled by the concealment of specific information related to the Portfolio’s
     subprime exposure and contents, the fair value determination method, MoneyGram’s use of credit ratings … and a change in the Portfolio’s investment strategy,” as well as the company’s interest in bankruptcy.
     Doty dismissed as a defendant MoneyGram’s former chief investment officer William Putney, stating that he did not sign the Securities and Exchange Commission documents and the complaint does not directly accuse him of “any specific misrepresentations or omissions.”

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