- The Washington Times - Thursday, December 12, 2002

NEW YORK (AP) President Bush's nominee to lead the Securities and Exchange Commission is targeted in a class-action lawsuit by investors accusing him of fraud for failing to disclose financial problems at Aetna Inc. when he was its top executive.
William H. Donaldson, chosen by Mr. Bush on Tuesday to become the nation's top corporate regulator after more than a year of scandals at numerous companies, was named in the lawsuit filed last year in federal court in New York.
In addition to the lawsuit, Mr. Donaldson's tenure at the helm of Aetna also sparked criticism this year from several institutional investors unhappy about his $7 million in cash and bonuses and about changes he made in the company's corporate-governance rules.
The lawsuit, which also names Aetna and its current chief executive, John W. Rowe, accuses company leaders of falsely boasting of the insurance giant's internal financial controls in 2000 and 2001 despite knowing about serious problems.
Specifically, the lawsuit says, Mr. Donaldson and other Aetna executives knew about problems in the way the company was handling its payment of medical claims. Those problems undermined the insurer's ability to set and maintain the cash reserves needed to cover such claims, the lawsuit says.
Repeated upbeat statements by Mr. Donaldson, Mr. Rowe and Aetna about the company's financial health "coupled with their failure to disclose these known, material problems resulted in a material deception of the investing public," the lawsuit says.
The three lead lawyers representing investors in the lawsuit did not return calls for comment yesterday. Aetna spokesman David Carter said the company "believes the suit has no merit" and has filed a motion to dismiss the charges.

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