Category Archives: 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.

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.

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.

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.