February 7, 2007

SACRAMENTO, CA – The California State Teachers' Retirement System today announced a $105 million settlement in a securities fraud case against AOL Time Warner, its accountants, banks and several former executives. The suit charged that AOL artificially inflated its stock price in 2000 and 2001 prior to its merger with Time Warner, resulting in damages to CalSTRS of approximately $135 million.

"CalSTRS pursued this court action to safeguard our member teachers and all stockholders for that matter," said Jack Ehnes, CalSTRS chief executive officer. "This is yet another example of our commitment to protect investors and to establish higher levels of corporate responsibility in the nation's financial markets."

The AOL case included the settlement of claims against Citigroup Global Markets Inc., Morgan Stanley & Co., Goldman Sachs & Co., Merrill Lynch & Co., Credit Suisse First Boston and former AOL senior executives. The settlement did not resolve CalSTRS' claims against AOL's accountants, Ernst & Young LLP. In agreeing to the settlement, AOL did not admit to any wrongdoing.

CalSTRS opted out of the federal class action lawsuit against AOL and the other defendants and filed a separate suit in California state court.

"By opting out of the federal actions, CalSTRS was able to pursue California state law claims in a California state court, resulting in a timely and much bigger recovery," said Ehnes.

The suit was prosecuted on behalf of CalSTRS by Cotchett, Pitre, Simon & McCarthy of Burlingame, California.

With a $157.8 billion investment portfolio, the California State Teachers' Retirement System is the second-largest public pension fund in the United States. It provides retirement, disability and survivor benefits to California's nearly 800,000 public school educators from kindergarten through community college.