U.S. District Judge Stewart Dalzell has approved a $125 million settlement by KPMG to settle allegations that the Big Four firm's audits of the Rite Aid corporation misled investors.
The settlement was agreed to in March 2003, but was delayed because a shareholder in the suit argued that legal fees were too high - as much as $2,500 per hour. The law firms that filed the class action case will receive over $31 million for their work on the case.
Now that the settlement has been accepted, shareholders of Rite Aid will begin receiving some degree of compensation for their losses. "It won't be everything they lost. It will just be a percentage, but not an insignificant one," said attorney Sherrie R. Savett.
Rite Aid executives were charged by federal prosecutors for conspiring to inflate profits and understate expenses in the company's financial statements from 1997-1999. KPMG audited the nation's third largest drug company during those years, and shareholders alleged that the firm was liable for not catching the discrepancies.
KPMG has argued that it is difficult for any auditor to uncover discrepancies in a company's financial statements if its top executives are intentionally trying to manipulate the books. The firm has denied any wrongdoing but indicated that it settled the case "for practical business reasons."