General Motors Corporation Case 09/19/2005
08/08/2008 - Settlement Proposed
Accounting firm Deloitte & Touche LLP and automaker General Motors Corporation (NYSE:GM) have tentatively agreed to a combined $303 million settlement to end a putative securities class action securities lawsuit alleging that GM put out false and misleading statements about the company’s finances.
Under the settlement, which is subject to court approval from U.S. District Judge Gerald Rosen in Detroit, GM would pay $277 million to investors and Deloitte & Touche LLP, which served as GM’s outside auditor during the time period at issue in the litigation, would pay $26 million. Reportedly GM spokeswoman Renee Rashid-Merem said “GM is pleased with the settlement and we look forward to it being resolved”. Reportedly the audit firm said “Deloitte & Touche LLP is pleased that it has been able to resolve the securities class action brought by investors in General Motors Corporation,” and “although it has strong defenses to these claims, Deloitte concluded that it was in the best interests of the firm and its clients to settle this matter now rather than face the burden, expense and uncertainty of continued litigation.” The two-year-old class-action lawsuit stems from claims that GM issued false and misleading statements about its finances to artificially inflate the company’s stock price and debt securities. According to a GM filing to the U.S. Securities and Exchange Commission on Thursday, August 7th, 2008, the settlement was reached in July and the automaker recorded the $277 million charge in its second quarter, when it posted a $15.5 billion net loss and. GM said it believes “that a portion of our settlement costs are covered by insurance,” and it expects to receive approximately $200 million in the current quarter from insurance.
09/19/2005 - Lawsuit filed
According to a press releasefrom a Law Firm dated August 8th, 2008, General Motors Corp., a settlement has been reached whereby GM will make a cash payment of $277 million. Defendant Deloitte & Touche LLP, which served as GM’s outside auditor during the period covered by the action, agreed to contribute an additional $26 million in cash — bringing the total amount of the settlement to $303 million. The action is pending before U.S. District Judge Gerald Rosen in U.S. District Court for the Eastern District of Michigan.
On October 16, 2007, Honorable Gerald E. Rosen signed the Order appointing Honorable Layn R. Phillips as Master for Settlement Negotiations.
On August 15, 2006, the plaintiffs filed a Third Amended Complaint, and the defendants have responded by filing motions to dismiss the Third Amended Complaint.
As summarized by the civil docket 05-CV-8088, on November 14, 2005, the Court entered the Pretrial Order No. 1 signed by U.S. District Judge Richard M. Berman consolidating the actions. On November 18, 2005, the plaintiffs filed an Amended Complaint. On February 6, 2006, the Court entered the Order granting the motion to appoint Deka Investment GmbH and Deka International, S.A. Luxembourg as Lead Plaintiffs. On March 15, 2006, the plaintiffs filed a Second Amended Complaint. On May 30, 2006, the Court entered the certified try copy of the conditional Multidistrict Litigation transfer out order transferring the action from the U.S. District Court for the Southern District of New York to the Easter District of Michigan, case number 06-MD-01749.
The original complaint alleges, inter alia, that defendants General Motors, General Motors Acceptance Corporation, and certain of GM’s officers and directors, issued or caused to be issued materially false and misleading statements to the investing public with respect to the Company’s financial performance and condition during the relevant time. In addition, during the fourth quarter of 2004 and the first quarter of 2005, defendants, with knowledge or reckless disregard of facts then in their possession, disseminated materially false and misleading projections, lacking in reasonable basis, with respect to GM’s first-quarter and year 2005 revenues, earnings and cash flow.
During the Class Period, when the Company’s debt ratings were materially inflated by defendants’ materially false and misleading statements and omissions, defendants caused GM to issue more than $18 billion in debt securities. When the true facts finally began to come out at the end of the Class Period, the price of GM stock, which had closed at $32.71 on March 15, 2005, declined by $4.57 per share, or 14%, to close at $28.14 per share on March 16, 2005. The prices of the Company’s debt securities also declined in the market.
Several similar, purported class action complaints have also been filed in the United States District Court for the Eastern District of Michigan.