WILMINGTON, Del. (Legal Newsline) - Shareholders of Amerigroup have initiated a class action lawsuit against members of the board of directors and executive officers of Amerigroup over its pending sale to WellPoint.

Also named as defendants are Goldman, Sachs & Co. and WellPoint. The City of Monroe Employees Retirement System and Louisiana Municipal Police Employees Retirement System claim that those advising the Amerigroup board urged it "to ignore known and interested suitors other than WellPoint in order to advance their own selfish interests."

According to the complaint, which was filed in Delaware Chancery Court on Thursday, "Beginning in December 2011, several suitors expressed unsolicited interest in entering a potential strategic transaction with Amerigroup."

The complaint makes specific reference to Feb. 9, when the CEO of a company referred to as "Company D" in Amerigroup's preliminary proxy informed James G. Carlson, Amerigroup's Chairman of the Board and CEO, that it was interested in acquiring Amerigroup.

It then says that several others were also interested. But, despite this, "on June 7, based upon the advice of the Company's financial advisors, Goldman and Barclays Capital, the Amerigroup Board agreed to enter into exclusive negotiations with WellPoint without adequately exploring the level of interest from the other suitors."

According to Amerigroup, WellPoint was given the nod because the transaction with Company D would cause more regulatory problems. But the shareholders say the Board granted WellPoint exclusivity because its "primary investment banker, Goldman, was hopelessly conflicted due to its own financial interests and pushed the Board sign the quick deal with WellPoint instead of pursuing a more lucrative deal with Company D. The Company's management also preferred the WellPoint deal because they got to keep their jobs."

The plaintiffs maintain that "Goldman was counterparty to a complex derivative transaction with the Company. Pursuant to this transaction, the Company would be required to pay Goldman $233.7million if Amerigroup was sold prior to Aug. 13 and a substantial, but not yet revealed amount, if the sale of the Company occurred prior to Oct. 22.

The complaint states that, "Despite the presence of conflicted advisors, deal negotiations between Amerigroup and WellPoint stalled in mid-June. To break the logjam, according to the complaint, WellPoint effectively purchased the loyalty of "Amerigroup CEO James Carlson, Chief Financial Officer James Truess and Chief Operating Officer Richard Zoretic. As a strategic buyer, WellPoint did not necessarily need to keep Amerigroup Management around if a deal closed. Nevertheless, WellPoint indicated its intention to retain the executives following consummation of a sale of the Company, and to otherwise make a deal with WellPoint worth their while."

Amerigroup is a multi-state health care company that focuses on persons who receive health care benefits through publicly funded health care programs, including Medicaid, Children's Health Insurance Program, Medicaid expansion programs and Medicare Advantage. Amerigroup is incorporated under the laws of the State of Delaware. Thomas Capps has been the Director since 2004.

Maureen McDonnell, Vice President of Communications for Amerigroup, declined to make a comment because of the pending litigation. Michael DuVally, a spokesman for Goldman Sachs, also declined to comment.

Archis Parasharami is a litigation partner in Mayer Brown's, Washington, D.C., office. He is a co-chair of the firm's Consumer Litigation & Class Actions practice.

Regarding merger and acquisition litigation, in general, he said, "A number of these lawsuits challenging proposed mergers and acquisitions are aimed at taking advantage of the fact that companies have strong business reasons to close merger transactions quickly, so that companies can integrate and realize the benefits of the combination.

"Because plaintiffs' lawyers realize that many companies will pay to settle even meritless claims in order to eliminate a cloud over the proposed transaction, they are filing more and more of these lawsuits, and often are receiving large attorneys' fees as a result."

More News