A federal judge will consider on April 28 whether a $38 million settlement offer by Deloitte & Touche to end a class-action lawsuit by Delphi Corp.’s shareholders is fair.
Earlier this month, Judge Gerald Rosen of the U.S. District Court in the Eastern District of Detroit gave his preliminary approval to the deal, which would end a dispute lasting since Delphi filed for bankruptcy protection in 2005. He has scheduled the April hearing for deciding whether to give his formal approval of the settlement.
Delphi had planned to reemerge from Chapter 11 protection in the early part of this year, but has been held up by investors challenging the details of the reorganization. In the meantime, litigation has progressed against the auto parts maker’s former auditor, alleging it took part in accounting improprieties that eventually led Delphi to go under.
Investors had accused Deloitte of hiding accounting problems while it was Delphi’s auditor between 1999 and 2005, a period that was cited in the accusations of financial fraud against several Delphi finance executives — including the CFO, controller, and treasurer. The matter led to investigations by the Securities and Exchange Commission and the Department of Justice.
By settling, Deloitte is not admitting or denying that it made false or misleading statements or that it took part in any deceptive conduct, a court document notes.
Francine Fiano, a Deloitte spokeswoman, says the auditor is “pleased” to resolve the case: “While we believe that D&T LLP has strong defenses to the claims asserted, we concluded that it was in the best interests of the Deloitte U.S. firms and our clients to settle this matter rather than continue to face the burden, expense, and uncertainty of further litigation.”
In 2005, the lead plaintiffs in the derivative lawsuit, — the Teachers’ Retirement System of Oklahoma, Public Employees’ Retirement System of Mississippi, Raiffeisen Kapitalanlage Gesellschaft mbH, and Stichting Pensioenfonds ABP — lobbed a complaint against Delphi, Deloitte, several of Delphi’s officers and directors, the banks that underwrote the company’ securities offerings, as well as several other parties. Delphi has already settled related claims worth more than $200 million, according to Grant & Eisenhofer, one of the law firms representing the plaintiffs.