According to the closing Order, dated in the Fall of 2001 from U.S. District Judge Lynn Adelman of the U.S. District Court in Milwaukee, more than $10 million is being paid to former shareholders of Harnischfeger Industries Inc. to settle an investment fraud lawsuit. The settlement agreement,said Harnischfeger's insurer, National Union, will pay $9.15 million as part of the settlement. An additional $1 million will be paid by PricewaterhouseCoopers, Harnischfeger's auditing firm, the settlement document says. The money will be split among an undetermined number of former Harnischfeger shareholders who are part of the class-action lawsuit.
The suit alleges that Harnischfeger artificially inflated its stock price by overstating profits from long-term projects at Indonesian papermaking plants. The suit also claims that investors lost millions when Harnischfeger's stock plummeted after the truth about its financial condition was revealed. The suit alleges that PricewaterhouseCoopers knew as early as Sept. 30, 1997, that Harnischfeger's costs for the first Indonesian projects were greater than anticipated. The lawsuit also alleges that PricewaterhouseCoopers then "recklessly accepted" revisions Harnischfeger made to cost estimates. According to the settlement, PricewaterhouseCoopers and Harnischfeger denied any wrongdoing.However, PricewaterhouseCoopers and Harnischfeger, without acknowledging any fault, "have concluded that further defense of the actions would be protracted and burdensome and expensive and therefore are willing to enter into a settlement," the settlement agreement says. Also, Great Neck Capital's attorneys have determined "that this settlement would be fair, reasonable and adequate and in the best interests of the class," the agreement says.
The original complaint alleges the Company and certain of its senior executives were named as defendants in three purported class action suits, entitled Great Neck Capital Appreciation Investment Partnership, L.P. v. Jeffery T. Grade, et al., C. William Carter v. Harnischfeger Industries, Inc. et al., and Norman Ellison v. Jeffery T. Grade, et al., filed on June 5, 1998, June 11, 1998 and July 21, 1998, respectively, in the United States District Court for the Eastern District of Wisconsin. These actions, which were consolidated, seek damages in an unspecified amount on behalf of an alleged class of purchasers of the Company's common stock, based principally on allegations that the Company's disclosures with respect to the Indonesian contracts of Beloit violated the federal securities laws.
On June 7, 1999, Harnischfeger Industries, Inc. and its domestic
operating subsidiaries (collectively, the "Debtors") filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy
Code in the United States Bankruptcy Court for the District of Delaware
and orders for relief were entered.