Originally created 03/09/99

Court considers stock offer



ATLANTA -- Even people who originally said "no thanks" to shares of Blue Cross stock should get them, according to a lawyer trying to convince the Georgia Supreme Court on Monday that his clients were cheated.

When Blue Cross-Blue Shield of Georgia converted from a nonprofit health insurance company to a for-profit corporation in 1996, it asked 144,000 policyholders if they wanted five shares of stock.

More than 74,000 took the stock, but 12,000 declined and 58,000 never responded to the offer.

Lawyers for the company told the seven justices those who turned down the deal or didn't respond missed their chance to cash in on a pending merger with California-based WellPoint Health Networks Inc.

"Now that it's clearly worth something, they want to get some of it," said Bruce Brown, attorney for Cerulean Companies, parent of Blue Cross.

The lawsuit seeks to compel Cerulean to issue new shares of stock and pay more than $100 million in damages.

At issue, according to attorneys on both sides, is whether simply offering the stock satisfied the company's stock-conversion plan and Georgia law or if the stock must actually be issued.

"It's undisputed. It's clear language," said John Bell, an attorney representing those who didn't get stock.

The giant conversion plan isn't at all clear, Mr. Brown said, and it never required that the stock be issued to anyone who didn't want it.

The company's accounting firm determined there was a slight possibility that accepting the stock could make the policyholders owe additional income taxes. Since there was no way to sell the stock to pay the tax, the company decided to give policyholders a choice of taking the stock or not, Mr. Brown said.

"We would have been forcing subscribers to take on a potential liability without any cash to pay it," he said.

For two years, there was no way to sell the stock until WellPoint agreed to buy the company. That merger has been held up by Mr. Bell's lawsuit, and the Supreme Court agreed to rush its consideration of the case. It must issue a decision by December.

An Augusta court has already ruled that Cerulean must issue the stock to all eligible policyholders. The company's appeal brought the case to the Supreme Court.

If more stock is issued, the value of each share would essentially be cut in half, Mr. Brown said.

Walter Jones is based in Atlanta and can be reached at (404) 589-8424 or mnews@mindspring.com.