New York law firm Milberg Weiss & Bershad is investigating possible illegal conduct in proposed class action lawsuits filed by certain other law firms on behalf of investors in Bermuda-registered Quanta Capital Holdings.

Since last summer Quanta’s non-Lloyd’s insurance and reinsurance lines have been in run-off following heavy losses incurred during the 2004 and 2005 hurricane seasons.

The company has been accused of violating US federal securities laws in a class action lawsuit filed in the US District Court of New York, with a number of law firms involved on behalf of investors who bought Quanta shares bewho bought Quanta shares between late 2005 and March 2006.Quanta is said to have misrepresented that it failed to properly account for losses and to set aside adequate reserves to account for specific weather-related claims in order to maintain a favourable rating from AM Best.

However an AM Best downgrade eventually came in June 2006 when Quanta’s financial strength rating went down from “B++” (very good) to “B” (fair). Quanta immediately requested AM Best withdraw the ratings as it went into partial run-off, with the exception of its Lloyd’s syndication.

According to a Market Wire report Milberg Weiss & Bershad is investigating possible illegal conduct of certain law firms acting on behalf of dissatisfied Quanta investors.

The class action being pursued also alleges Quanta and certain of its executive officers and directors made misleading statements in two prospectuses in connection with a secondary offering of 11.4 million common shares at $4.75 and 3 million preferred shares at $25 each.

In those prospectuses Quanta estimated net losses from 2005 to be $68.5 milliom, however in March 2006 it was revealed the net losses were more than $10.2 million higher at $78.7 million. That news caused Quanta shares to drop 40 percent in value from $4.73 to $2.83 per share.

Quanta was set up in 2003 with an equity offering that raised $505 million net capital.

Earlier this month Quanta announced it had formed a joint venture called Pembroke JV Ltd. with Lloyd’s insurer Chaucer Holdings to own Pembroke Managing Agency, which has received authorisation from Lloyd’s.