View this article online: https://www.claimsjournal.com/news/national/2008/08/11/92644.htm
General Motors Corp. and its auditor have agreed to pay $303 million to settle claims that the automaker misled shareholders about its finances.
Under the settlement, GM would pay $277 million to investors, while its auditor, Deloitte & Touche LLP, would pay $26 million, pending approval from U.S. District Judge Gerald Rosen in Detroit.
The two-year-old class-action lawsuit claimed that GM misstated and mischaracterized its revenue, earnings and cash flow, artificially inflating the company’s stock price and debt securities.
The case “confirms the importance of allowing international investors access to U.S. courts when they’ve been harmed by securities fraud,” said Eric Belfi, an attorney with Labaton Sucharow LLP, which represented two units of Germany’s DekaBank as the lead plaintiffs in the case.
GM said in a Securities and Exchange Commission filing Thursday that the settlement was reached in July and the automaker recorded the $277 million charge in its second quarter, when it posted a $15.5 billion net loss.
GM also said in the filing that it expects to receive about $200 million in the current quarter from insurance covering the legal costs it incurred.
“GM is pleased with the settlement and we look forward to it being resolved,” GM spokeswoman Renee Rashid-Merem said Friday.
Deloitte spokeswoman Deborah Harrington said in an e-mailed statement the company was happy with the outcome.
“Although it has strong defenses to these claims, Deloitte concluded that it was in the best interests of the firm and its clients to settle this matter now rather than face the burden, expense and uncertainty of continued litigation,” Harrington said.
The case was filed on behalf of all GM shareholders at the time the alleged misconduct took place, primarily in 2000 and 2001.
Belfi said Deka Investment GmbH and Deka International SA suffered a $24 million loss from GM’s actions. He said the lawsuit was resolved relatively quickly for an accounting case.
“This is an important recovery for investors,” Belfi said. “The combined settlement of over $300 million is impressive just by its size, and also by the fact that we were able to accomplish this is just 2 1/2 years of litigation. … Some of these cases can go on for many years.”
Earlier this year, Deloitte and Delphi Corp. reached a similar settlement with shareholders of the auto parts supplier. In February, the same judge from the GM case tentatively approved a $38.25 million payment from Deloitte as part of a $325 million settlement to investors who claimed misconduct by Delphi and those who oversaw its finances.