Jan. 30--A class-action lawsuit has been filed against Triad Guaranty Inc. and its current and former top executive by stockholders claiming the officials violated federal securities laws.

The lawsuit was filed yesterday on behalf of James Phillips in the U.S. District Court for the Middle District of N.C. Four law firms, including one in Raleigh, are a party to the lawsuit, with other law firms expected to join.

Stockholders affected are those who bought the common stock of Triad from Oct. 26, 2006, when the share price was $53.27, through Nov. 10, 2008, when the share price was 88 cents.

The plaintiffs are requesting damages, plus interest, that would represent a recouping of their losses from the time they bought the shares to its share price of 88 cents on Nov. 10.

The company said today in a statement that "it believes the plaintiff's allegations are without merit and intends to vigorously contest the action."

Besides the company, Mark Tonnesen, its former chief executive and president, and Ken Jones, its current chief executive, were named in the lawsuit.

Tonnesen led the company for three years before announcing an early retirement on July 18 that was effective Aug. 15. Jones took over as chief executive on Oct. 22.

The lawsuit accuses Triad of "issuing materially false statements concerning the company's business and financial results."

That led stockholders to purchase the company's common stock "at prices that were artificially inflated," the lawsuit said.

The lawsuit alleges that the defendants failed to disclose that Triad "was not adequately accounting for loss reserves in violation of generally accepted accounting principles (GAAP), causing its financial results to be materially misstated."

The lawsuit also alleges that Triad failed to use "proper underwriting practices" for its insurance written in 2006 and 2007, including the insurance related to its Alt-A and pay-option adjustable-rate mortgage products. Triad also was accused of having "far greater exposure to anticipated losses and defaults related to insurance written in 2006 and 2007 than it had disclosed."

The lawsuit is the latest major development at Triad, which analysts have described as the first major mortgage insurer to fall victim to the national housing crisis.

As have most mortgage insurers, Triad Guaranty has been hit hard by the sharp rise in delinquencies and foreclosures in overheated real-estate markets, such as California, Florida, Georgia and Nevada.

In reaction to the collapse of the talks with potential partner Lightyear Capital LLC last summer, the company has cut at least 40 percent of its work force, or 100 jobs.

The company also discontinued writing new mortgage-insurance business on July 15. It is conducting "an orderly transition of its business to runoff," which means that the company's revenue will come from existing policies that will expire.

The company has said it expects to exist for another seven to 12 years.

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