Judge Approves $36M Settlement Balance in PNC Scandal
A federal judge in Pittsburgh has approved the last part of a settlement involving more than 73,000 shareholders who lost money in a PNC Financial Services Group Inc. accounting scandal.
The shareholders are ready to receive about $2,600 each, for a total of $36.6 million, based on the $193 million settlement and interest. That amounts to 68 cents per share, the Pittsburgh Tribune-Review reported. It's not clear when settlement money will be distributed, and the final amount will be reduced by attorneys' fees.
The last remaining portion of the class-action lawsuit was approved by U.S. District Judge David S. Cercone, July 13.
PNC spokesman Brian Goerke told the newspaper that this "final step in the litigation" would have no financial impact on PNC because the funds had already been reserved.
The suit was filed after the banking company sold $762 million in underperforming corporate loans to three partnerships it had formed with American International Group Inc. The move allowed PNC to inflate its earnings in the second, third and fourth quarters of 2001 because the loans were removed from the balance sheet, so the depreciation of the assets wasn't counted.
Earnings were restated, as required by the Federal Reserve, and the results were $155 million less than originally reported. The lawsuit contends that stockholders who bought the bloated shares between July 19, 2001, and July 18, 2002, lost an estimated $1.15 billion.
PNC paid $25 million to the U.S. Department of Justice to settle conspiracy to commit securities fraud charges in June 2003. The government ordered PNC to place $90 million into the $193 million restitution fund. Most of the rest of the escrow fund came from insurance companies and from AIG, which paid in $44 million.
A separate shareholder lawsuit is pending against Ernst & Young, which reviewed the questionable loan sales.