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Shareholders sue Northwest officials
A New York law firm filed a shareholders' lawsuit against four officials of Northwest Airlines Corp. seeking compensation for losses that stock owners sustained when the carrier filed for bankruptcy protection.
The firm, Milberg Weiss, which has filed many similar shareholder suits, alleges in the lawsuit filed in New York that Northwest insiders sold their stock when they had nonpublic information about the airline's bankruptcy plans.
The suit names Northwest Chairman Gary Wilson, chief executive Doug Steenland, former director Al Checchi and former chief financial officer Bernie Han.
The firm said it will seek class-action certification for the lawsuit and that it is searching for potential plaintiffs who bought Northwest stock between April 21 and Sept. 14, the date that Northwest filed for Chapter 11 bankruptcy.
The lawyers said the defendants made misleading statements about the likelihood of bankruptcy despite knowing months in advance that a bankruptcy filing was "imminently anticipated." As early as April, the firm alleged, Northwest's leaders "viewed bankruptcy reorganization as the only way to dump the crushing burden of Northwest's pension obligations" on the Pension Benefit Guaranty Corp.
"That simply is not true," Northwest said in a statement. "Northwest has been a leader in working with Congress to protect its employees' pensions."
Northwest has been lobbying for a measure that gives airlines 20 years to fully fund their defined-benefit pension plans.
The lawsuit notes that Wilson sold $21.3 million worth of stock in the months before the bankruptcy filing and that Checchi sold $8.4 million of Northwest stock in late April.
Terry Fruth, a shareholder litigation attorney from Minneapolis, predicted thesuit would succeed only if there is "a paper trail on this whole question of who knew what and when."
George Singer, a Minneapolis bankruptcy attorney, predicted the defendants would argue that the bankruptcy risk was stated publicly for months, and that they didn't trade on insider information.