Converium Holding AG, a Zurich-based international reinsurer acquired by SCOR in August 2007, has announced the preliminary settlement of the securities class action pending against the company in the Southern District of New York (S.D.N.Y.). The case, originally filed in October 2004, stems from allegations that executives at Converium artificially inflated the price of Converium’s stock by failing to disclose to the public certain deficiencies in the company’s loss reserves. The case in the S.D.N.Y. is limited to U.S. invesotrs. Converium has agreed to settle those claims, as well any claims by non-U.S. investors, for an aggregate amount of $114.5 million (74 million EUR). The claims by non-U.S. investors will be settled in a court proceeding in the Netherlands, apparently following in the footsteps of a similar settlement entered into by Royal Dutch Shell last year.
Parmalat S.p.A., a producer and distributor of dairy products and fruit-based beverages based in Milan, Italy, has announced the preliminary settlement of the securities class action pending against the company in the S.D. of New York. The case, originally filed in January 2004, stems from allegations that Parmalat and its bankers, lawyers, and auditors engaged in a massive and complex scheme to overstate Parmalat's assets and profits for more than a decade. Under the terms of the settlement, Parmalat will issue to class members 10.5 million shares of stock, valued at approximately $37 million at the current market price.
The 10b-5 Daily has frequently posted about the Parmalat case, especially on the issue of scheme liability. But it all started with a post in 2004 entitled "You're No Martha."
Biovail Corporation (NYSE: BVF and TSX: BVF), an Ontario-based specialty pharmaceutical company, has announced the tentative settlement of the securities class action pending against the company in Ontario Superior Court. The case, originally filed in September 2005, relies on the same factual basis as an earlier class action brought by U.S. plaintiffs and stems from allegations that Biovail made false financial projections.
The settlement agreement provides for the plaintiffs in the Canadian suit to share in the $138 million settlement already agreed upon in the U.S. securities class action. The 10b-5 Daily has posted previously on the settlement of the U.S. case and the company's attempt to sue short sellers of its stock. Press coverage of the Canadian settlement can be found in the The Globe and Mail.
Xerox Corp. (NYSE: XRX), a Connecticut-based provider of document management technology and services, has announced the preliminary settlement of the securities class action pending against it in the D. of Conn. The case, originally filed in August 2000, stems from allegations that Xerox improperly accounted for its leasing of copiers and other equipment to customers. Xerox eventually engaged in a significant financial restatement.
The settlement is for $750 million, of which Xerox will pay $670 million and KMPG, who audited the company's financial statements, will pay $80 million. Xerox expects to pay its portion of the settlement in five installments over the course of this year. The New York Times and The Wall Street Journal had articles about the settlement in their Friday editions.
United Rentals, Inc. (NYSE: URI), a Connecticut-based equipment rental company, has announced the preliminary settlement of the securities class action pending against it in the D. of Conn. The case, originally filed following the August 2004 disclosure of a SEC inquiry, stems from allegations that the company manipulated the company's publicly-released financial data through improper accounting practices. The settlement is for $27.5 million and is contingent upon United Rentals and its insurers finalizing agreements on the portion of the settlement to be funded by the insurers.
Royal Dutch Shell p.l.c. (NYSE: RDS/A) has taken another step toward resolving the investor claims related to the company's 2004 recategorization of certain proved oil and gas reserves. After reaching a proposed settlement with non-U.S. shareholders last year for approximately $350 million, the company announced today that it has entered into an agreement in principle with U.S. shareholders. The U.S. class would receive a base settlement amount of approximately $83 million (based on proportions previously established in the proposed non-U.S. settlement), with an additional payment of $35 million to be divided proportionally between the U.S. class and the participants in the proposed non-U.S. settlement.
R&G Financial Corp. (PINKSHEETS: RGFC), a financial holding company based in San Juan, Puerto Rico that provides banking, mortgage banking, and insurance services, has announced the preliminary settlement of the securities class action (and a related derivative suit) pending against the company in the S.D. of New York. The case, originally filed in April 2005, stems from allegations that R&G Financial failed to disclose and misrepresented adverse facts in its financial statements, lacked adequate internal controls, and engaged in financial accounting practices that caused its net income and financial results to be materially overstated. The settlement is for $39 million, with R&G Financial contributing approximately $29 million, and the company’s insurers and certain individual defendants contributing approximately $11 million.
Transkaryotic Therapies, Inc. (“TKT”), a Massachusetts-based biopharmaceutical company acquired by Shire plc in 2005, has announced the preliminary settlement of the securities class action pending against the company in the D. of Mass. (The settlement was agreed to in Oct. 2007.)
The case, originally filed in January 2003, alleges that executives at TKT failed to disclose material adverse information regarding the prospects for FDA approval of Replagal, TKT’s drug for the treatment of Farbry disease. The settlement is for $50 million, with Shire contributing $27 million and the remaining $23 million paid by its insurers.
KLA-Tencor Corp. (NASDAQ: KLAC), a California-based provider of process controls and yield management solutions for the semiconductor and microelectronics industries, has announced the preliminary settlement of the securities class action pending against the company in the N.D. of Cal. The case, originally filed in June 2006, stems from allegations that KLA-Tencor failed to properly account for the stock options it granted its employees.
The settlement is for $65 million. For coverage of the earlier options-related settlement between KLA-Tencor and the SEC, see this New York Times article.
Deloitte & Touche LLP, an auditing firm, has announced the preliminary settlement of the claims brought against it in the Delphi securities class action (E.D. Mich.). The case, originally filed in 2005, stems from Delphi's financial restatement and subsequent bankruptcy.
Deloitte's settlement is for $38.25 million. The settlement follows on the heels of Delphi's related $342 million settlement announced last September. Reuters has an article.
A couple of settlement items:
(1) The Tyco settlement has been approved. Not every class member will be happy, however, as the court rejected the fee objections raised by three institutional investors. As requested, the plaintiffs' attorneys will receive $464 million, believed to be the largest fees payout ever by a single company defendant in a securities class action. Reuters and the Associated Press have articles.
(2) Court approval, however, is not the final step in a settlement. The funds have to be distributed, which has turned out to be problematic in the Computer Associates case. The Wall Street Journal has a report discussing the accidental overpayments to some claimants. The settlement administrator is trying to get the money back, but many of the checks have been cashed.
Biovail Corporation (NYSE: BVF) (TSX: BVF), an Ontario-based specialty pharmaceutical company, has announced the preliminary settlement of the securities class action pending against the company in the S.D. of New York. Originally filed in 2003, the case stems from allegations that the company made false financial projections.
The settlement is for $138 million, of which Biovail estimates it will pay $85 million after settling all insurance claims. The 10b-5 Daily has previously posted on the tumult surrounding the Biovail securities litigation, including the company's attempts to sue short-sellers of its stock.
Sonus Networks, Inc. (NASDAQ: SONS), a Massachusetts-based provider of voice infrastructure equipment and software for wireline and wireless service providers, has announced the preliminary settlement of one of two securities class actions pending against the company in the D. of Massachusetts. The settled case, originally filed in 2004, stems from allegations related to a large revenues restatement.
The settlement is for $40 million, and the company has yet to determine the portion, if any, of its $15.3 million in available insurance coverage that will be allocated to the settlement. The 10b-5 Daily has previously posted about the motion to dismiss decision in the case.
American Italian Pasta Company (PINKSHEETS: AIPC), a Missouri-based producer of dry pasta, has announced the preliminary settlement of the securities class action pending against the company in the W.D. of Missouri. The case, originally filed in August 2005, stems from allegations that AIPC failed to disclose materially adverse facts in its financial statements.
The settlement covers the securities class action claims against AIPC (but not related derivative claims) and has a total value of $25 million. Of that total value, the company's insurers will pay $11 million in cash and the company will issue $14 million in common shares.
Mercury Interactive Corp., a California-based software company acquired by Hewlett-Packard Co. in 2006, agreed earlier this week to the preliminary settlement of the securities class action pending against the company in the N.D. of California. The case was originally filed in 2005 and alleges that executives at the company backdated stock options and made false or misleading statements concerning Mercury Interactive's financial results.
The settlement is for $117.5 million and is the largest to date involving stock options backdating. Press coverage can be found in the Wall Street Journal (subscrip. req'd) and the New York Times.
Delphi Corp. (PINKSHEETS: DPHIQ), a Michigan-based automotive parts manufacturer, has announced the preliminary settlement of the securities class action pending against the company in the E.D. of Michigan. The case, originally filed in 2005, stems from Delphi's financial restatement and subsequent bankruptcy.
The global settlement covers both ERISA and securities class action claims and has a total potential value of $342 million. The securities class action portion is as follows: "the class of purchasers of Delphi's debt securities will receive an allowed claim and the class of purchasers of Delphi's equity securities will receive an allowed interest in the combined amount of $204 million in Delphi's Chapter 11 case as well as approximately $90 million in cash from other defendants and insurance carriers." For the allowed interest in the Chapter 11 case, the investors will receive the "same treatment as Delphi's general unsecured creditors." Bloomberg has an article on the settlement.
The recent string of notable settlements (see here and here) reached its crescendo yesterday. Tyco International Ltd. (NYSE: TYC), a diversified global company, has announced the preliminary settlement of the securities class action pending against the company in the D. of N.H. The case was filed in 2003 and alleges an enormous accounting fraud scheme (which has led to related criminal law convictions for individual Tyco officers).
The settlement is for $2.975 billion and is being heralded as the largest payout ever by a single corporate defendant in a securities fraud lawsuit. As part of the settlement, Tyco has agreed to assign its related claims against PricewaterhouseCoopers, its former auditor, to the plaintiffs. Press coverage can be found in the Associated Press, the New York Times, and Business Week.
Cardinal Health, Inc. (NYSE: CAH), an Ohio-based healthcare company, has announced the preliminary settlement of the securities class action pending against the company in the S.D. of Ohio. The case was filed in 2004 and alleges that the company made false or misleading statements concerning its financial results.
The settlement is for $600 million, but is still subject to approval by the lead plaintiffs. MarketWatch has an article on the settlement. (The 10b-5 Daily has previously posted about the lead plaintiff, discovery stay, and motion to dismiss decisions in the case.)
Priceline.com, Inc. (Nasdaq: PCLN), a Connecticut-based online travel service, has announced the preliminary settlement of the securities class action pending against the company in the D. of Conn. The case was originally filed in 2000 and alleges that the company misrepresented its financial condition. Discovery in the case was scheduled to have been completed by the end of this year. The settlement is for $80 million, with $30 million being paid by the company's insurance carriers.
Doral Financial Corp. (NYSE: DRL), a Puerto Rico-based financial services company, has announced the preliminary settlement of the securities class action pending against the company in the S.D.N.Y. The case was filed in 2005 and alleges that Doral improperly accounted for its derivative portfolio of interest-only strips.
The settlement is for $130 million, consisting of payments from Doral ($95 million), its insurers ($34 million), and one or more individual defendants ($1 million). Doral also agreed to certain corporate governance changes. Because of Doral's precarious financial situation, the settlement is contingent on the company's ability to obtain outside funding for its business. The Associated Press has an article.
Motorola, Inc. (NYSE: MOT), an Illinois-based wireless and broadband communications company, has announced the preliminary settlement of the securities class action pending against the company in the N.D. of Ill. The case was filed in 2002 and alleges that Motorola failed to disclose vendor financing to a Turkish wireless telephone company in connection with the sale of telecommunications equipment. The Turkish company eventually defaulted on its loans owed to Motorola. The trial had been scheduled to begin this week.
The settlement is for $190 million, with $75 million coming from insurance proceeds. The Newark Star-Ledger has an article on the settlement. (The 10b-5 Daily has previously posted about the lead plaintiff and motion to dismiss decisions in the case.)
Royal Dutch Shell p.l.c. (NYSE: RDS/A) has announced a landmark settlement with non-U.S. shareholders resolving claims related to the company's recategorizations of certain proved oil and gas reserves. Under the settlement, which was executed pursuant to a new Dutch statute allowing the Amsterdam Court of Appeals to declare binding a collective resolution of a commercial dispute, Shell will pay $352.6 million plus administrative costs to shareholders who bought on non-U.S. exchanges and were resident or domiciled outside the U.S. from April 1999 to March 2004. The parties have also requested that the $120 million Shell paid to the SEC in a related settlement be distributed in a non-discriminatory manner among certain U.S. and non-U.S. shareholders.
Shell also announced that it plans to extend the same proportional settlement offer to shareholders who bought in the U.S. or were resident or domiciled in the U.S. during the same period. According to the press, it is the second-largest settlement of a securities fraud dispute by a European-based company, behind Royal Ahold's $1.1 billion settlement in late 2005. Media coverage can be found in the Wall Street Journal (subscrip. req'd), Bloomberg, and the New York Times.
Time Warner, Inc. (NYSE: TWX) has settled the claims of five large institutional shareholders who opted-out of a 2005 settlement of the the securities class action against the company over accounting fraud at AOL. Under the opt-out settlement, Time Warner will pay $400 million, $246 million of which will go to the University of California, with other smaller amounts being paid to the California Public Employees Retirement System, Amalgamated Bank, and two pension funds for Los Angeles County employees. The University of California claims that it will receive "between 16 and 24 times what we would have gotten through the class." (For an earlier post on the Time Warner opt-out cases, see here). The Wall Street Journal Law Blog and the New York Sun have reports on the settlement. Best In Class thinks it may be the largest opt-out settlement ever.
CMS Energy, a Michigan-based energy provider, has announced the preliminary settlement of the securities class action pending against the company in the E.D. of Michigan. The case, which was originally filed in May 2002, alleges that CMS Energy made various false and misleading statements by including the results of certain "round-trip" energy trades entered into by one of its Texas-based subsidiaries as part of its revenues and expenses. The proposed settlement is for $200 million, of which CMS Energy will pay $123.5 million and its insurers will pay $76.5 million.
CIGNA Corp. (NYSE: CI), a Philadelphia-based employee benefits provider, last week announced the preliminary settlement of the securities class action pending against the company in the E.D. of Pa. The case, which was filed in 2002 and scheduled for trial in March 2007, alleges that CIGNA made various false and misleading statements by providing unrealistically high income guidance to the market and failing to disclose that it had been under-reserving for certain reinsurance obligations. The 10b-5 Daily has posted on a decision in the case related to the disclosure of confidential sources. The proposed settlement is for $93 million.
Credit Suisse Group and Banca Nazionale del Lavoro SpA are the first two defendants to settle in the ongoing Parmalat securities litigation in the S.D.N.Y. It was announced last week that the two banks agreed to pay $50 million (evenly divided) and make corporate governance changes. The case alleges a massive scheme by Parmalat and its bankers, lawyers, and auditors to overstate assets and profits for more than a decade. The 10b-5 Daily has posted frequently about the scheme liability decision in the case (for the latest post see here).
Martha Stewart Living Omnimedia, Inc. (NYSE: MSO), a New York-based media company, has announced the preliminary settlement of the securities class action pending against the company in the S.D.N.Y. The case was originally filed in 2002 and alleges that founder Martha Stewart and other company officers made false and misleading statements about Stewart's sale of ImClone shares in December 2001, which resulted in an inflated stock price. (The 10b-5 Daily has commented on this case in a series of posts entitled "The Martha Stewart Watch," the most recent of which can be found here.) The proposed settlement is for $30 million, of which $15 million will be paid by the company, $10 million will be paid by the company's insurers, and $5 million will be paid by Stewart herself.
Krispy Kreme Doughnuts, Inc. (NYSE: KKD), a North Carolina-based retailer and wholesaler of doughnuts (including the famous Hot Original Glazed doughnut), has announced the preliminary settlement of the securities class action (and related derivative cases) pending against the company in the M.D. of North Carolina. The case was originally filed in 2004 and alleges various accounting misrepresentations.
The proposed class action settlement is for $75 million, of which $34,967,000 will be paid by the company's insurers, $4,000,000 will be paid by the company's auditor, and $35,853,000 will be derived from common stock and warrants to purchase common stock to be issued by the company. Two of Krispy Kreme's former officers will contribute $100,000 each. The parties apparently were unable to come to an agreement, however, with a third former officer - the company's fomer Chairman and CEO - and the settlement expressly preserves any claims against him that "may be asserted by the Company in the derivative action for contribution to the securities class action settlement or otherwise under applicable law."
The BISYS Group, Inc. (NYSE:BSG), a New Jersey-based provider of outsourcing solutions for financial services providers, has announced the preliminary settlement of the two related securities class actions pending against the company in the S.D.N.Y. The cases involve alleged fraud in connection with a series of financial restatements made by the company over the past few years. The settlement is for $66.5 million, of which no more than $25 million will be covered by insurance.
For those readers interested in the collective scienter theory (see this post), the denial of the motion to dismiss in one of the BISYS cases is an example of the application of that theory. The citation for the opinion is In re BISYS Sec. Lit., 397 F.Supp.2d 430 (S.D.N.Y. 2005).
BellSouth Corp. (NYSE: BLS), an Atlanta-based telecommunications service provider, has announced the preliminary settlement of the securities class action pending against it in the N.D. of Georgia. The case was originally filed in August 2002 and alleges various accounting improprieties, including that BellSouth failed to properly write down goodwill associated with its Latin American operations. The proposed settlement is for $35 million.
McLeodUSA, Inc., an Iowa-based integrated voice and data services company, has announced the preliminary settlement of the securities class action pending against the company in the N.D. of Iowa. The case was originally filed in January 2002 and alleges that the company issued a series of materially false and misleading statements about its ability to fund and build a national network, as well as other business initiatives. The settlement is for $30 million.
Cisco Systems, Inc. (NASDAQ: CSCO), a San Jose-based Internet networking company, has announced the preliminary settlement of the securities class action pending against the company in the N.D. of Cal. The case was originally filed in 2001.
The settlement is for $91.75 million, which will be paid by Cisco's insurers. Unusually, the press release contains a statement from plaintiffs' counsel describing the settlement as "fair" given the "litigation risks," including "a lack of insider trading, and Cisco was not required to make a financial restatement."
King Pharmaceuticals, Inc. (NYSE: KG) has announced the preliminary settlement of the securities class action pending against the company in the E.D. of Tenn. The case was originally filed in 2003 and alleges securities violations in connection with the Company’s underpayment of rebates owed to Medicaid and other governmental pricing programs.
The settlement is for $38 million. Long-time readers of The 10b-5 Daily may remember the King Pharmaceuticals case as the source for one of the more amusing descriptions of the lead plaintiff selection process ever put forward by a court.
El Paso Corp. (NYSE: EP), a Houston-based energy company, has announced the preliminary settlement of the securities class action (and a related derivative case) pending against the company in the S.D. of Tex. The case was originally filed in 2002 and alleges securities law violations in connection with alleged wash trades, mark-to-market accounting, off-balance sheet debt, the overstatement of natural gas and oil reserves, and manipulation of the California energy market. The settlement is for $273 million, with El Paso contributing $48 million and the balance being paid by its insurers.
The El Paso securities class action has an interesting history and has been the subject of a number of posts on The 10b-5 Daily over the years (see here, here, here and here).
DHB Industries, Inc. (OTC Pink Sheets - DHBT), a Florida-based manufacturer of body armour, has announced the preliminary settlement of the securities class action (and related derivative suit) pending against the company in the E.D.N.Y. The case was originally filed in September 2005 and alleges that the company failed to disclose that its body armor products were defective and did not meet the standards of its customers.
The settlement is for $34.9 million in cash, plus 3,184,713 shares of DHB common stock. The company's insurers will pay $12.9 million. In an unusual settlement provision, DHB stated that its CEO (who apparently is being forced out) "will help fund the payments to be made by the Company by exercising 3 million warrants held by him at an elevated exercise price." Moreover, the company apparently "has the option to put to [its CEO], approximately 3 million shares of common stock to finance the remaining portion of the cash settlement."
Newsday has an article on the settlement.
Williams Companies, Inc. (NYSE:WMB), a Tulsa-based provider of natural gas, has announced the preliminary settlement of the securities class action pending against the company in the N.D. of Oklahoma. The case was originally filed in 2002 and alleges that Williams engaged in financial fraud related to its energy trading operation and a former telecommunications subsidiary.
The settlement is for $290 million. The company expects to pay between $145 million and $220 million, with the rest of the funds coming from its insurers. According to a press release from the lead plaintiff, the settlement comes on the eve of trial and after a discovery effort that included "more than 180 depositions and reviews of more than 18 million pages of documents."
Lies, Damn Lies, & Forward-Looking Statements has a number of posts sorting out all of the details on the settlement, including noting that Williams' outside auditors, Ernst & Young, have apparently also settled for $21 million.
Sears, Roebuck and Co., a wholly owned subsidiary of Sears Holdings Corporation (Nasdaq: SHLD), has announced the preliminary settlement of the securities class action pending against the company in the N.D. of Illinois. The case was originally filed in 2002 and alleges that Sears made misrepresentations concerning its credit card business. The settlement is for $215 million. The company is paying $85 million and expects the rest of the funds to come from insurance proceeds. For an analysis of the motion to dismiss decision in the case, see this post.
Over the weekend, the Wall Street Journal had an article (via wsj.com - subscrip. req'd) on the IPO allocation cases. The article discusses the potential impact of the proposed JPMorgan settlement on the overall recovery for investors.
Quote of note: "After J.P. Morgan Chase & Co. agreed in recent days to pay $425 million to settle its part of the civil charges, estimates of the potential amounts that investors could get back have jumped and could reach several billions of dollars, plaintiffs' lawyers say. That could make the case among the biggest brought against major Wall Street firms related to a series of scandals earlier this decade, including the collapse of companies such as Enron and WorldCom. Some plaintiffs' lawyers say they now expect a higher recovery for investors partly because the amount that J.P. Morgan -- the first of the banks to settle the case -- agreed to pay is surprisingly large, given that the IPOs the company led accounted for less than 10% of the total damages calculated by the plaintiffs."
Over $400 million was the right way to bet on this week's settlements.
Freddie Mac (NYSE: FRE) has announced the preliminary settlement of the securities class action and related derivative suits pending against the company in the S.D.N.Y. The cases relate to Freddie Mac's restatment of financial results for the years 2000 through 2002. The settlement is for $410 million and includes corporate governance reforms.
JPMorgan Chase & Co. (NYSE: JPM) has entered into a settlement of the claims against the company in the IPO allocation cases. The settlement is for $425 million. JPMorgan is the first underwriter defendant to settle.
Two notes:
(a) There is already plenty of speculation that JPMorgan's decision to settle early is the result of the fact that it was forced to pay a significant premium when it was the last major bank to settle in the WorldCom case.
(b) Based on the size of this settlement and the fact that there are still 54 underwriter defendants, it appears unlikely that the issuer defendants (who entered into a conditional settlement nearly three years ago) will have to make any payments.
Terayon Communications Systems, Inc. (Nasdaq: TERN), a Santa Clara-based provider of digital video networking applications, has announced the preliminary settlement of the securities class action pending against the company in the N.D. of Cal. The case originally was filed in 2000 and is based on allegedly misleading statements concerning the company's ability to obtain certification for its technology.
The settlement is for $15 million, with Terayon paying $2.3 million and the rest covered by insurance. Prior to this settlement, the case had been a lightening rod for criticism over the relationship between short sellers and the securities plaintiffs' bar. For posts from The 10b-5 Daily on the case, see here, here, and here.
The proposed $400 million settlement of the Qwest securities class action is getting hit from all sides. Not only has there been an objection to the attorneys' fees, but two former executives of the company are alleging that they were improperly excluded from the settlement talks. The court will review the settlement in May. Reuters has an article.
Quote of note: "But in their filing the former executives said shareholders and their lawyers 'irresponsibly failed to explore' the possibility of including Nacchio and Woodruff in the settlement talks, while letting Qwest's founder, billionaire financier Philip Anschutz '...get released from all liability without paying a penny.'"
HealthSouth Corp. (OTC Pink Sheet: HLSH), the largest provider of physical rehabilitation services in the U.S., announced last week the preliminary settlement of the securities class action pending against the company in the N.D. of Alabama. The settlement also covers related derivative suits. The cases stem from the massive accounting improprieties at the company revealed in 2003.
The settlement is for $445 million, including a cash payment from HealthSouth's insurance carriers of $230 million and HealthSouth common stock and warrants valued at $215 million. Interestingly, "the federal securities class action plaintiffs will receive 25% of any net recoveries from future judgments obtained by or on behalf of HealthSouth with respect to claims against Richard Scrushy, the company's former chief executive officer, Ernst & Young, the company's former auditors, and UBS, the company's former primary investment bank, each of which remains a defendant in the derivative actions as well as the federal securities class actions." Bloomberg has this report.
Merrill Lynch has announced the preliminary settlement of 23 securities class actions related to its research coverage of Internet stocks. The cases allege that Merrill Lynch disseminated overly optimistic research and investment recommendations to garner investment banking business. The settlement is for $164 million.
As discussed in this Los Angeles Times article, the settlements surprised some experts because of Merrill Lynch's apparently strong legal position. Many of the cases had already been dismissed, although appeals were pending. (The dismissals are discussed here and in a number of other posts.)
As a result of these settlements and prior actions, only 2 of 41 class actions related to Merrill Lynch's research coverage remain pending. Notably, one of those suits is the Dabit case currently before the U.S. Supreme Court.
Nortel Networks Corp. (NYSE: NT), the largest North American telephone equipment maker, has announced the preliminary settlement of the securities class actions pending against the company in the S.D.N.Y. The cases are related to Nortel's announcement of revised financial guidance during 2001 and its revision of its 2003 financial results and restatement of other prior periods.
The proposed settlement is for $2.4 billion in cash and stock. In particular, Nortel has agreed to pay $575 million in cash and issue stock equivalent to 14.5 percent of the company. Nortel also will contribute one-half of any recovery from its existing litigation against certain former officers who were terminated for cause. The agreement is conditioned on payments from existing insurance - an issue that has not yet been resolved.
Bloomberg reports that the proposed settlement is the fifth-largest securities class action settlement in U.S. history.
Cornerstone Research has released an updated report on post-PSLRA settlements of securities class actions through December 2005. The findings include:
(1) Excluding the Enron and WorldCom settlements, the value of securities class action settlements was $3.5 billion in 2005, up from $2.9 billion in 2004.
(2) The settlement value increase is attributable to a 10% increase in the number of settlements (124 in 2005 vs. 113 in 2004), a $2.1 million increase in average settlement value ($28.5 million in 2005 vs. $26.4 million in 2004), and an increase in the number of settlements over $100 million (9 in 2005 vs. 7 in 2004).
(3) The median value of settlements increased 19% to $7.5 million in 2005.
The press release announcing the report can be found here.
Quote of Note (press release): "[W]hile the Cornerstone study finds a significant increase in settlement amounts in 2005, a report recently issued by the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research found decreases in 2005 in both the number of case filings, as well as the amount of investor losses associated with case filings. Since there is a delay between case filings and case resolutions, these results suggest - along with the effects of the Dura decision - potential lower settlement values in the future."
Bristol-Myers Squibb Co. (NYSE - BMY), a global pharmaceutical company headquartered in New York, has announced a preliminary agreement to settle the securities class action pending against the company in the D.N.J. The background of the case, which was set to go to trial, is discussed in this post from last August.
The settlement is for $185 million. The plaintiffs announced that it is the "largest recovery ever obtained against a pharmaceutical company in a securities fraud case involving the development of a new drug" and that Bristol-Myers has agreed to publicly disclose the clinical study design and the results of clinical trials for every drug it markets. The company, however, was less committal about the non-financial aspects of the settlement, telling the Associated Press that it "already had two Web sites where it discloses clinical trial results."
In 2004, Bristol-Myers paid $300 million to settle a different securities class action relating to alleged financial misstatements.
Tenet Healthcare Corp., the second-largest U.S. hospital chain, has announced the preliminary settlement of the securities class action pending against the company in the C.D. of Cal. The case was originally filed in 2002 and alleges that Tenet made false or misleading statements about Medicare payments and other issues.
The settlement is for $215 million, including $1.5 million in personal payments from two former officers. Tenet's insurers will contribute $75 million. A related state court derivative case is also being resolved. Bloomberg has an article on the settlement.
Royal Ahold NV (NYSE: AHO), the Dutch owner of the Giant and Stop & Shop supermarket chains, has announced the preliminary settlement of the securities class action pending against the company in the D. of Md. The case was originally filed in 2003 after Royal Ahold announced a large financial restatement.
The settlement is for $1.1 billion and is the largest U.S. securities class action settlement ever entered into by a European company. Bloomberg has this report.
Compliance Week has an article on the battle between counsel for the WorldCom class action plaintiffs and counsel for the WorldCom opt-out plaintiffs over who obtained a better settlement for their clients. The competing press releases can be found here (class action plaintiffs) and here (opt-out plaintiffs). Thanks to Securities Litigation Watch for the link.
Addition: An interesting sidenote to the $651 million settlement with the opt-out plaintiffs - Citigroup and J.P. Morgan agreed to join the plaintiffs in petitioning the SEC to toughen its disclosure rules for securities offerings.
The controversy over the "reverse auction" in the KPMG tax shelter class action continues (see this post). The New Jersey Law Journal reports (via law.com - free regist. req'd) that a trio of plaintiffs' firms plan to challenge the preliminary approval of a $225 million settlement.
Qwest Communications International Inc. (NYSE:Q), a Denver-based provider of Internet, data, video, and voice services, has announced the preliminary settlement of the securities class action pending against the company in the D. of Colo. The case was originally filed in 2001 and alleges that Qwest engaged in sham transactions for fiber-optic network capacity to hide declining demand.
The settlement is for $400 million, with an additional $10 million to be paid by co-defendant Arthur Andersen. Qwest's former CEO and CFO are also co-defendants in the case, but are not part of the settlement. According to the announcement, the settlement can be terminated under certain circumstances, "including in the event that the SEC elects not to distribute to the putative class members the $250 million penalty that Qwest has already committed to pay to the SEC." Bloomberg has this report.
In a special Sarbanes-Oxley section, today's Wall Street Journal has an article (subscrip. req'd) on the recent trend of requiring corporate governance reforms as part of the settlement of shareholder litigation. Although the article is generally positive about this trend, it has been the subject of some debate.
Quote of note: "There can be immediate advantages, too, such as helping to avoid a protracted fight inside a courtroom, and, more important, possibly reducing payouts. . . . [I]n a handful of cases tracked by NERA since Sarbanes-Oxley was enacted in 2002, evidence suggests that the plaintiffs in a majority of those cases agreed to reduced cash payouts in return for governance reforms. Of the eight settlement agreements tracked that included cash and governance reforms, five included financial payments that were at least 40% lower than NERA's model had predicted, and only two turned out to be higher."
MarketWatch reports that U.S. District Judge Denise Cote (S.D.N.Y.) has given final approval to a series of settlements in the WorldCom case. The settlements were preliminarily agreed to earlier this year and total $3.6 billion.
Quote of note: "'Out of some 4 million potential class members, more than 830,000 of whom submitted proofs of claim, only seven filed timely formal objections to the 2005 settlements,' Judge Cote said in her opinion. 'The very low number of objections evidences the fairness of those settlements.'"
Addition: A New York Law Journal article (via law.com - free regist. req'd) discusses the related attorneys' fees award. In total (including earlier settlements), the two lead plaintiffs' firms will receive $335 million.
PSS World Medical, Inc. (Nasdaq: PSSI), a Florida-based distributor of medical products, has announced the preliminary settlement o