GM and Deloitte settle shareholder lawsuit
General Motors Corp. and its auditor have agreed to pay $303 million to settle claims that the automaker misled shareholders about its finances.
Under the settlement, GM would pay $277 million to investors, while its auditor, Deloitte & Touche, would pay $26 million, pending approval from U.S. District Judge Gerald Rosen in Detroit.
The 2-year-old class-action lawsuit claimed that GM misstated and mischaracterized its revenue, earnings and cash flow, artificially inflating the company’s stock price and debt securities.
The case “confirms the importance of allowing international investors access to U.S. courts when they’ve been harmed by securities fraud,” said Eric Belfi, an attorney who helped represent two units of Germany’s DekaBank as the lead plaintiffs in the case.
GM said in a Securities and Exchange Commission filing Thursday that 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.
GM also said in the filing that it expected to receive about $200 million in the current quarter from insurance covering the legal costs it incurred.
“GM is pleased with the settlement, and we look forward to it being resolved,” GM spokeswoman Renee Rashid-Merem said Friday. Deloitte spokeswoman Deborah Harrington said the company was happy with the outcome.
The case was filed on behalf of all GM shareholders at the time the alleged misconduct took place, primarily in 2000 and 2001.
Belfi said Deka Investment and Deka International suffered a $24-million loss from GM’s actions. He said the lawsuit was resolved relatively quickly for an accounting case.