OSG Investors Settle Tax Debt Case for $16.2M

After nearly three years of litigation, the tanker company's former CFO is among the defendants who agreed to settle securities fraud claims.
Matthew HellerAugust 10, 2015
OSG Investors Settle Tax Debt Case for $16.2M

Overseas Shipbuilding Group investors have agreed to $16.25 million in settlements of their class-action claims alleging executives, underwriters and an auditor of the tanker company hid a $435 million tax debt that forced it into bankruptcy.

The plaintiffs had previously announced in February that they had reached agreements in principle to settle with all the defendants except Ernst & Young. As part of the settlements submitted last week for a judge’s approval, company directors and officers, including former CEO Morten Arntzen and former CFO Myles Itkin, agreed to pay $10.5 million.

The other settlements consist of $4 million from underwriters including Citigroup, Deutsche Bank and Goldman Sachs Group and $1.75 million from auditor PricewaterhouseCoopers. A judge dismissed EY from the case in May.

“We think it’s an extraordinary result in an extremely complex case,” David Rosenfeld, a lawyer for the plaintiffs, told Reuters.

Investors led by Stichting Pensioenfonds DSM Nederland and the treasurer of the state of Indiana filed their securities fraud lawsuit in October 2012, just before OSG filed a Chapter 11 bankruptcy petition as questions about its financial statements shut it out of credit markets.

According to the suit, Arntzen and Itkin sold bonds and shares of OSG while falsely representing that the company owed no taxes related to income from a subsidiary that acted as a holding company for foreign entities that owned or operated OSG’s international vessels.

During bankruptcy proceedings, the Internal Revenue Service filed a claim stating OSG owed the government over $435 million plus $27.9 million in interest.

OSG emerged from bankruptcy last year, and in May filed for an initial public offering.