The law firms representing the Lead Plaintiffs in the securities class action litigation involving Delphi Corp., the U.S. auto parts maker now in Chapter 11 bankruptcy proceedings, have announced that an agreement in principle has been reached with Delphi's former outside auditor, Deloitte & Touche LLP, to settle claims against the auditing firm for $38,250,000 in cash.
The case arises out of alleged accounting improprieties at Delphi that forced the Company, on June 30, 2005, to restate its financial results for all fiscal periods dating back to 1999 and to reverse hundreds of millions of dollars in reported earnings during those periods. Lead Plaintiffs -- Teachers' Retirement System of Oklahoma, Public Employees' Retirement System of Mississippi, Raiffeisen Kapitalanlage Gesellschaft m.b.H., and Stichting Pensioenfonds ABP -- were appointed by a federal court in June 2005 to represent a proposed class of investors who acquired Delphi securities between March 7, 2000 and March 3, 2005 the ("Class Period"). The Complaint filed by those institutional Lead Plaintiffs asserted claims under the federal securities laws against Delphi, Deloitte, who was Delphi's outside auditor during the Class Period, certain officers and directors of Delphi, the banks that underwrote Delphi's offerings of securities, and certain other entities.
Judge Gerald E. Rosen, the federal judge in the Eastern District of Michigan before whom the case is pending, appointed a retired federal judge, Layn R. Phillips, to serve as a Special Master to conduct settlement discussions. Following an extensive mediation conducted by Judge Phillips, Deloitte and Lead Plaintiffs reached an agreement whereby Deloitte will pay to the Class $38,250,000 to settle all claims asserted against Deloitte in the action. The settlement is one of the larger settlements obtained from an accounting firm to settle claims of securities fraud. The settlement is conditioned on approval by Judge Rosen, who will pass on the settlement after the members of the Class are given appropriate notice of the settlement and an opportunity to be heard.
This settlement follows an earlier settlement in the case, also arising out of a mediation conducted by Judge Phillips, whereby Lead Plaintiffs obtained a settlement potentially worth at least $284 million from Delphi and its insurance carriers and its former banks to resolve all claims against Delphi and certain other defendants. That settlement is contingent upon final approval by Judge Rosen as well as approval of Delphi's plan of reorganization in Delphi's Chapter 11 proceeding.