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Philadelphia-Corporate defendants are not entitled to know the identity of confidential informants in securities fraud cases if the plaintiff is able to plead sufficient “other facts” that support the claim, but the plaintiffs are nonetheless required to turn over the names and addresses of every witness with “relevant information,” a federal judge has ruled. “Requiring specific identification of confidential sources from among the universe of individuals with relevant knowledge in a securities fraud case would chill informants from providing critical information which may end up being in the public eye,” U.S. District Judge Michael M. Baylson wrote in In re CIGNA Corp. Securities Litigation, No. 02-8088 (E.D. Pa.). Baylson, who sits in Philadelphia, concluded that the lead plaintiff had adequately supported the claim by citing statements from CIGNA officials and internal documents, and that the case therefore did not hinge on the testimony from the confidential informants. As a result, Baylson concluded that the lead plaintiff “should not be put under any compulsion to disclose the specific identity of its confidential informants.” Instead, Baylson said, “fairness compels only that if an individual who is a confidential informant does have relevant information, that person’s identity should be disclosed as a discoverable matter, but without disclosing that he or she is a confidential informant.” ‘Knowingly false’ estimates In the suit, investors who purchased CIGNA common stock between Nov. 2, 2001, and Oct. 24, 2002, allege that the company and three of its top executives made a series of false and misleading statements about the company’s finances. The suit alleges that CIGNA repeatedly said it expected its 2002 earnings in health care to be in the range of $925 million to $955 million. Those estimates, the suit alleges, were “knowingly false” at the time they were issued because, “at this time, CIGNA was actually expecting 2002 health care earnings to be down sharply.” On Oct. 24, 2002, the suit says, CIGNA admitted that it expected its 2002 operating earnings to be in the range of $725 million to $750 million. Stock prices fell sharply on the news of the revised estimates, the suit says, and CIGNA stock fell by 45%, losing almost $30 per share. The lead plaintiff in the suit is the Pennsylvania State Employees’ Retirement System (SERS), which is represented by a team of 16 lawyers led by Sherrie R. Savett of Philadelphia’s Berger & Montague and Mel E. Lifshitz of New York’s Bernstein Liebhard & Lifshitz, along with Pennsylvania Attorney General Thomas W. Corbett Jr. and SERS chief counsel Michael A. Budin.

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