Several Nucorp Suits Settled for $41 Million : 14 Ex-Officers, Directors to Pay 4,000 Plaintiffs
Fourteen former officers and directors of collapsed Nucorp Energy will pay $41 million to settle scores of claims by former shareholders, the federal magistrate overseeing the settlement negotiations confirmed Tuesday.
An agreement in principle was reached Friday and a formal document is expected to be signed “in the next few days,” according to U.S. Magistrate Harry McCue.
The complicated agreement has been hammered out over the past 18 months, McCue said. The lawsuit represents the combined legal action of 4,000 plaintiffs around the country.
The lawsuits alleged violations of registration and anti-fraud provisions of federal and state securities laws.
Among the defendants who settled the suits are former Nucorp Chairman and Chief Executive Richard L. Burns, former President David A. Tenwick and former directors Frederick Frank, Fred Hervey and O. Morris Sievert. Also settling the case is Shearson Lehman Bros., the big investment house and a Nucorp underwriter that controlled one seat--Frederick Frank, a managing partner--on Nucorp’s board.
Most Is Insured
Attorneys representing the settling defendants either would not comment on the agreement Tuesday or could not be reached.
All but $2 million of the $41 million that will be distributed to the more than 4,000 class-action and private-party plaintiffs will be paid by a handful of companies that insured the defendants. Under terms of the 41-page settlement agreement, the names of the insurance firms will not be made public.
Nucorp was one of the fastest-growing oil and gas firms to emerge during the oil crunch of the 1970s: In the two years before it collapsed into bankruptcy in July, 1982, the San Diego-based company acquired more than 25 oil-related firms throughout the Western United States.
Nucorp’s revenue, earnings and stock price skyrocketed. But of the $168.8 million in sales reported between December, 1980, and December, 1981, nearly 17% was later discovered to be from “pre-billing”--the practice of reporting as revenue sales orders that had been received but not yet shipped.
When the oil industry’s fortunes turned down, Nucorp was staggered by $615 million in debts and with contracts requiring it to purchase about $175 million in oil pipe supplies.
Obtained Injunction
The Securities and Exchange Commission subsequently filed suit against Burns, and late last year it obtained a permanent injunction prohibiting him from further violating SEC regulations.
Under a bankruptcy reorganization plan completed in December, Nucorp creditors will receive only a minuscule percentage of money owed them; company shareholders will be left empty-handed.
“This is a gigantic first step to one of the most successful settlements of litigation in history,” said San Diego attorney William Lerach, who, along with San Francisco attorney David Gold, were the lead plaintiffs’ lawyers.
Not included in the settlement are Arthur Andersen & Co., Nucorp’s former auditors; Donaldson, Lufkin & Jenrette Securities, Nucorp’s securities underwriters; Continental Illinois National Bank of Chicago, Nucorp’s commercial banker, and Circle K Corp., which owned about 12% of Nucorp stock and whose president, Fred Hervey, was a Nucorp director.
