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In re Delphi Corporation Securities Litigation
(United States District Court
for the Eastern District of Michigan)
Securities fraud class action filed on behalf of a class of persons and entities who
purchased or acquired the securities of Delphi Corporation ("Delphi") between March 7, 2000 and
March 3, 2005 (the "Class Period") and were damaged thereby (the "Class"). BLB&G is
Co-Lead Counsel of the Class representing its client the Public Employees' Retirement
System of Mississippi ("Mississippi PERS").
BLB&G and Mississippi PERS Obtain $38.25 Million Recovery from Deloitte & Touche LLP;
Combined Recoveries of Up to $322 Million
On December 27, 2007, BLB&G and Mississippi PERS, along with the other institutional plaintiffs leading the
investor lawsuit, announced that an agreement in principle has been reached with Delphi’s former auditor,
Deloitte & Touche LLP (“Deloitte”) to settle claims against the auditing firm for $38.25 million in cash.
The settlement, which received preliminary approval from the Court on February 6, 2008 and is still subject to
final approval, is one of the larger settlements ever paid by an accounting firm in a securities litigation.
This recovery, combined with a previous recovery of up to $284.1 million from Delphi’s former officers and
directors as well as the banks that underwrote Delphi’s offerings during the Class Period (discussed below),
brings the total recovery to over $322 million.
On February 1, Lead Plaintiffs voluntarily dimissed the claims against the remaining third parties, namely,
JP Morgan Chase & Co. (as successor in interest to Bank One Corporation (“Bank One”)), SETECH Inc. (“SETECH”),
and BBK Ltd. (“BBK”).
Lead Plaintiffs Obtain a Recovery of Up to $284.1 Million for the Benefit of the Class
On August 31, 2007, BLB&G and Mississippi PERS, along with the other institutional plaintiffs
leading the investor lawsuit, reached a settlement on behalf of the Class with Delphi, certain of Delphi's
former officers and directors (the “Individual Defendants”), and the investment banks that underwrote Delphi’s
offerings during the Class Period (the “Underwriter Defendants”). The settlement provides for a recovery with
a potential value of $284.1 million, comprised of numerous payments, including an allowed claim with a potential
value of $179 million that will be paid from Delphi as part of the Company’s emergence from bankruptcy;
$78.6 million from the insurance carriers on behalf of the Individual Defendants; $1.5 million from the
Underwriter Defendants; contingent payments of up to $10 million to be paid by the insurance carriers on
behalf of the Individual Defendants; and a $15 million third party payment. As originally constituted,
the Settlement had a potential value of $295.1 million, $204 million of which was to be funded by Delphi
in the form of "plan currency" in the reorganized Company. However, due to a modification in the Company's
bankruptcy plan of reorganization, the amount of plan currency being contributed by Delphi has been reduced to
$179 million, and a third party is now contributing $15 million in cash on Delphi's behalf.
For more information on the settlement,
please click here: www.delphiclasssettlement.com
On September 5, 2007, the Court preliminarily approved the settlement.
To view the Court’s Order, please click
here.
A fairness hearing on the settlement was held before the Honorable Gerald E.
Rosen of the United States District Court for the Eastern District of Michigan, Southern Division,
Theodore Levin Courthouse, 231 W. Lafayette Blvd., Detroit, Michigan 48226 in Courtroom 733,
at 9:30 a.m. on November 13, 2007.
On January 11, 2008, the Court granted final approval of the settlement.
To view the Court’s Order, please click
here.
IN ORDER TO BE ELIGIBLE TO SHARE IN THE BENEFITS OF THE SETTLEMENT, CLASS
MEMBERS MUST SUBMIT A COMPLETED AND SIGNED PROOF OF CLAIM FORM POSTMARKED NO LATER THAN JANUARY, 18, 2008.
Click on the following links to view a copy of the:
• Summary Notice of Pendency of Class Action
• Notice of Pendency
• Proof of Claim Form
Court Grants Plaintiffs Request to Lift the PSLRA Discovery Stay
On February 15, 2007, the Court issued an opinion and order granting
Lead Plaintiffs' Motion for Partial Modification of the PSLRA-mandated discovery
stay. Click here
to view the Court’s
Opinion and Order Regarding Lead
Plaintiffs’ Motion for Partial Modification of PSLRA Discovery Stay. Lead
Plaintiffs are now able to obtain from the named Defendants, as well as third
parties General Motors and Electronic Data Systems (“EDS”), those documents that
they already produced to various government agencies conducting investigations
into the alleged fraud perpetrated at Delphi. Pursuant to this Order, all
defendants have started producing documents to Lead Plaintiffs. Additionally,
Lead Plaintiffs have received documents from the Debtor that Delphi previously
produced in connection with the Company's internal investigation into the
alleged fraud.
BLB&G Files Objection on Behalf of Investors to Key Employee Compensation
Program in Delphi Scandal
November 22, 2005 - BLB&G, on behalf of Co-Lead Plaintiff the Public Employees’
Retirement System of Mississippi and the Class, filed an objection to Delphi's proposed Key Employee
Compensation Plan on November 22, 2005. To view a copy of the objection, click
here.
Background
On June 27, 2005, the Honorable Naomi Reice Buchwald appointed BLB&G client
Mississippi PERS as Co- Lead Plaintiff and BLB&G as Co-Lead
Counsel for the Class. To see a copy of the complaint, filed on September 30, 2005 in federal
court in New York, click
here.
Lead Plaintiffs allege violations of federal securities laws by Delphi Corporation and certain trusts
it had established to sell securities; certain of Delphi’s former officers and directors; Delphi’s
outside auditor, Deloitte & Touche LLP; a number of investment banks that underwrote Delphi securities;
and certain third parties [Setech, BBK, and Bank One (since acquired by J.P. Morgan Chase)] that entered
into sham transactions intended to falsely inflate Delphi’s reported financial results.
Specifically, Plaintiffs allege that defendants made materially false and misleading statements because,
at the time they made these statements, the defendants failed to disclose the following adverse facts
that, among others: (1) the Company booked IT service provider and non-IT supplier rebates and credits
to income before they were earned; (2) the Company improperly treated payments for IT services as assets
instead of as expenses; (3) the Company improperly treated financing transactions involving inventory as
sales and disposition of inventory; (4) the Company improperly treated financing transactions involving
“indirect materials” as sales of these materials; (5) the Company improperly accounted for payments made
to and credits received from General Motors as warranty settlements and obligations; and (6) the Company’s
financial statements were not prepared in accordance with GAAP. As a result of the Company’s alleged accounting
violations, the Company’s reported revenue, net income and financial results were materially overstated during
the Class Period. Indeed, on June 30, 2005, Delphi restated its earnings for the past five years. Delphi’s
Restatement reduced 2001 retained earnings by $265 million; reduced 2002 net income by $24 million; narrowed
its 2003 net loss by $46 million; and widened its 2004 loss to $4.8 billion from the $36 million originally
reported.
Delphi declared bankruptcy on October 8, 2005.
Litigation over the bulk of the Debtors' proposed Key Employee Compensation Plan,
an employee retention and bonus plan which Debtors initially submitted for approval
in October 2005, has been suspended in Bankruptcy Court. On December 12, 2005,
the Judicial Panel on Multidistrict Litigation issued a transfer order consolidating
the securities litigation to the Eastern District of Michigan, in front of the Honorable
Gerald Rosen. On March 10, 2006, Defendants moved to dismiss the Complaint on a variety
of grounds. Lead Plaintiffs' Opposition to
Defendants' Motions to Dismiss was filed on
May 12, 2006, and defendants filed reply briefs on June 12, 2006. Motions to dismiss
are now fully briefed and before the Court. Pursuant to the PSLRA discovery stay provision,
formal discovery cannot begin until the defendants’ motions to dismiss are resolved.
On October 17, 2006, Judge Rosen affirmed the appointment of Mississippi as co-Lead Plaintiff.
On October 30, 2006, the Securities and Exchange Commission filed civil fraud claims against Delphi,
nine former Delphi executives, including defendants Battenberg, Dawes, Blahnik and Free and four
employees of outside firms. The SEC's claims corroborate the legal theories propounded in Lead
Plaintiffs' Complaint and provide further details concerning its central factual allegations.
In light of the SEC action as well as information uncovered by Lead Plaintiffs'
ongoing investigation and other significant developments, including developments
in Bankruptcy Court, on November 28, 2006 Lead Plaintiffs filed a
Motion for Leave to Amend
the Consolidated Class Action Complaint. On October 26, 2007, Lead Plaintiffs filed their first amended complaint,
asserting additional allegations against Deloitte and the three scheme liability defendants, JPMorgan, BBK and Setech.
Click here to view a copy of the
First Amended Consolidated Class Action Complaint.
Firm partners Sean Coffey
and
Hannah Ross and
associate
Matthew Moehlman
are responsible for prosecuting this action.
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