Michigan Pension Fund Sues World Wrestling Entertainment

The City of Warren Police and Fire Retirement System in Warren, Michigan, has filed a class action lawsuit against World Wrestling Entertainment (WWE) that alleges the sports entertainment company and certain senior executives made false and misleading statements regarding a distribution deal in Saudi Arabia. It also accuses CEO Vince McMahon of reaping $261 million from insider trading.

Also named as defendants in the lawsuit are WWE’s former co-presidents George Barrios and Michelle Wilson, who are also accused of insider trading.

The case is centered on WWE’s strategic relationships with Saudi Arabia, a multi-year television distribution rights agreement with direct broadcast satellite provider Orbit Showcase Network (OSN), and a 10-year partnership with the Saudi General Sports Authority to host live events in the country.

The complaint alleges that during the class period, which dates from Feb. 7, 2019, to Feb. 5, 2020, WWE executives made false and misleading statements and failed to disclose that the company was experiencing problems with the Saudi government and that negotiations over a renewed broadcasting distribution deal had broken down.

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“WWE did not have the ability to expand its operations in the Middle East or within Saudi Arabia as had been represented to investors,” said the lawsuit, which added that analysts estimated the failed partnership would have been worth about $500 million to WWE.

The suit also claims the company hid the fact that the Saudi government and its affiliates had failed to make tens of millions of dollars in payments owed to WWE pursuant to existing contractual commitments between the parties.

“The dispute spiraled out of control, culminating in a decision by WWE to cut a broadcasting feed of a live event held in the country,” the lawsuit said. “In retaliation, the Saudi government temporarily refused to allow several WWE wrestlers to leave the country in what was later described as akin to a ‘hostage situation’ under the pretense of mechanical airplane issues.”

The complaint alleges that problems with WWE’s relationship with the Saudis began to be revealed in a series of partial disclosures that began in April 2019 when the company disclosed disappointing financial results and fiscal guidance. The suit says several analysts connected the financial results to adverse issues in the company’s dealings with the Saudis.

The lawsuit claims the disclosures caused the price of WWE’s shares to plummet from a class period high of more than $100 per share to as low as $40.24 per share on Feb. 6, 2020, representing a 60% share price decline.

“However, the company’s most senior executives … took advantage of WWE’s inflated stock price to sell millions of dollars’ worth of their own WWE shares,” the lawsuit sai.

The suit alleges that in a single stock sale, McMahon sold more than 3.2 million WWE shares for over $261 million in “gross insider trading proceeds.” It said the sale occurred with only a few days left in the company’s first quarter of 2019, adding that “outside investors were not so fortunate, suffering hundreds of millions of dollars in losses and economic damages.”

Jerry McDevitt, a partner at law firm K&L Gates who is the outside counsel for WWE, said the accusations are baseless and that the case is without merit.

“The lawsuit constructs an entirely fictional storyline based on false and fabricated internet gossip, not facts,” McDevitt told CIO. “And we will move to have it dismissed.”

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Tags: City of Warren Police and Fire Retirement System, Insider Trading, Lawsuits, Pension Funds, Saudi Arabia, Vince McMahon, World Wrestling Entertainment, WWE

Legal and General Investment Management (LGIM), the largest asset manager in the UK with £1.19 trillion ($1.47 trillion) in assets under management, is gearing up to launch a completely fossil fuel-free pension fund later this year, according to a report from The Guardian.

The move was stimulated by investor concerns targeted toward the fund, which was found to have several holdings in companies heavily involved in the fossil fuel industry, according to the report.

The move signifies the company’s continued approach to sustainable-centric investments, and outspoken approach to shareholder activism with regards to these issues. LGIM’s Head of US Stewardship and Sustainable Investments, John Hoeppner, told CIO that he and his team, across strategies, will vote against a chairman where “[the company’s] disclosures seem laggard,” meaning companies that do not hold up to minimum industry-specific “green” disclosure standards that LGIM adopted for all of its fund strategies.

“We say you’re personally responsible for your company’s climate laggard,” Hoeppner said.

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Emma Douglas, head of defined contribution at LGIM, said, “Based on our funds in our Future World range, the new fund will be driven by long-term thematic analysis, the integration of environmental, social, and governance (ESG) considerations, and active ownership, which means engaging to bring about real, positive change in the companies we invest in,” The Guardian reported.

The fund’s focus will exclude oil companies and take a wider ethical stance by barring investments in tobacco, weapons, and pure coal manufacturers, according to the publication. It will be open to corporate pension plans and individuals.

LGIM hosts a series of capital raises called the Future World funds that seek to incorporate a “climate-tilt” in its portfolios, and “decrease the weight of companies with carbon emissions, fossil fuel reserves, and increase the weight of companies with green revenues, e.g., renewable energy, water efficiency, etc.,” Hoeppner told CIO.

The Future World funds received criticism from one of the company’s partners, PensionBee, for holding a significant investment in Shell. The Guardian quoted LGIM as saying the company needs to balance environmental and financial concerns when putting together the investment portfolio, previously noting that Shell is one of the largest payers of dividends in the UK.