According to a press release dated April 12, 2007, investors will get about $9 million from claims they and PNC Financial Services Group Inc. brought against accounting giant Ernst & Young LLC in a scandal that caused PNC to restate millions in earnings in 2001. The settlement approved Thursday by a federal judge in Pittsburgh wraps up litigation that has generated a pool of about $203 million to be divided among tens of thousands of PNC investors, said Barry Weprin, the lead plaintiffs' attorney. 'This basically is the last piece of a series of settlements that have seven or eight pieces, including private litigation and parts of which are settlements with the government,' Weprin said. … New York-based AIG agreed in 2004 to pay $126 million in restitution and penalties to the SEC and Justice Department to settle allegations of aiding the flawed accounting by PNC. But that money is not considered part of the pool that will be used to repay PNC investors, nor is the $25 million that PNC paid to settle securities-law violations in a deal with the Justice Department in June 2003. Instead, the $203 settlement fund was created through class-action lawsuits brought by private investors and government actions on their behalf, Weprin said. In earlier settlements, PNC and AIG paid more than $156 million combined to the SEC for the investors' pool. Last month, London-based Ernst & Young was censured by the SEC and paid $1.6 million in restitution and interest, but did not admit or deny a role in the PNC scandal. Meanwhile, investors had also sued PNC, its attorneys, AIG and Ernst & Young, claiming they lost as much as $1 billion, Weprin said. Defense attorneys had argued the losses were closer to $90 million. PNC, AIG and the attorneys settled most of that litigation last year in federal court in Pittsburgh for nearly $36 million more, Weprin said. As part of that settlement, PNC assigned its legal claims against Ernst & Young to the plaintiff investors. It was those claims and others investors filed against the accounting firm that were settled Thursday for $9.075 million -- bringing the settlement pool to about $203 million, Weprin said.
On December 20, 2006, a Settlement Agreement was filed by the plaintiffs regarding a settlement with the remaining defendant Ernst & Young LLP. On January 10, 2007, the Court entered the Preliminary Order certifying the class representatives and setting the Settlement Fairness Hearing for April 12, 2007.
In a press release dated July 16, 2006, a federal judge has approved the balance that remained from a settlement of a class-action lawsuit arising from a PNC Financial Services Group Inc. accounting scandal. More than 73,000 shareholders stand to recover a total of $36.6 million, or about $2,600 each, based on the $193 million settlement and interest. Shareholders would get about 68 cents for each share owned. U.S. District Judge David S. Cercone approved the remaining portion Thursday.
As summarized by a law firm’s website, on March 25, 2005 Lead Plaintiffs and Defendants PNC and certain Individual Defendants entered into a Stipulation of Settlement to settle the claims against these Defendants. Pursuant to the terms of this proposed settlement, which was preliminarily approved by the Court, a settlement fund in the amount of $36,600,000 will be created for the benefit of the Class, consisting of all persons who purchased PNC common stock or call options on PNC common stock or sold put options on PNC common stock from July 19, 2001 through and including July 18, 2002. A Settlement Fairness Hearing to determine, among other things, whether the proposed Settlement is fair, reasonable and adequate was held on August 4, 2005. The parties wait for the Court to issue its Final Order and Judgment. The case is continuing against PNC’s outside auditor, Ernst & Young LLP (“E&Y”). On March 31, 2005, Lead Plaintiffs filed a Second Consolidated Amended Complaint against E&Y. E&Y filed its Motion to Dismiss this complaint, which Lead Plaintiffs opposed. On March 13, 2006, the Court denied certain counts of E&Y’s motion. Thereafter, E&Y filed a Motion for Reconsideration of the March 13 Order. On April 5, 2006, Judge David Stewart Cercone issued an Order granting E&Y’s motion, vacating the March 13 Order and reinstating E&Y’s Motion to Dismiss. On April 28, 2006 Lead Plaintiffs filed their response to the Motion to Dismiss and on May 4, 2006, E&Y filed its reply in further support of its Motion to Dismiss. Prior to a ruling on E&Y’s motion, the parties agreed to settle the claims against E&Y (the “E&Y Settlement”).
In a press release dated December 22, 2004, PNC Financial Services Group Inc. agreed to a $30 million settlement to resolve a class-action investor lawsuit that accused the company of using improper insurance contracts to hedge against volatile earnings. Insurers for the Pittsburgh financial-services company will place the money in a settlement fund while New York insurance company American International Group Inc. will pay an additional $4 million to the fund.
On April 2, 2002, motions to consolidate all related cases and for the appointment of Lead Plaintiff and Lead Counsel were filed with the Court. On May 31, 2002 the Court ordered all related cases to be consolidated. By order of the Court, dated July 22, 2002, Lead Plaintiffs and Lead Plaintiffs’ choice of Counsel were appointed. On October 4, 2002, Lead Plaintiffs filed a Consolidated Class Action Complaint (the “Consolidated Complaint”), which extends the class period to include all persons who purchased shares of PNC common stock from July 19, 2001 through and including July 18, 2002. Defendants filed their Motions to Dismiss Lead Plaintiffs’ Consolidated Complaint on December 6, 2002. Plaintiffs filed their opposition to these motions on January 10, 2003. From February 2003 through June 20, 2003 both parties filed additional briefing on these issues. Thereafter certain of the parties attended mediation proceedings in an attempt to settle the claims alleged in the action.
The original complaint charges PNC, certain of its officers and directors, and its auditor and consultant Ernst & Young, LLP ("E&Y") with violations of the Securities Exchange Act of 1934. PNC is a diversified financial services company operating community banking, corporate banking, real estate financial, asset-based lending, wealth management, asset management and global fund services businesses. The complaint alleges that during the Class Period, defendants misrepresented PNC's financial results and issued false and misleading statements with regard to PNC's financial condition. Defendants failed to properly consolidate liabilities associated with three subsidiaries PNC had established with American Insurance Group ("AIG"). Throughout the Class Period, defendants misrepresented PNC's earnings as well as the Company's ability to reduce its liabilities related to non-performing assets. In fact, defendants' failure to conform with proper accounting standards produced inflated earnings and misled investors as to PNC's true financial condition. The complaint further alleges that while acting as auditor and a consultant for PNC, E&Y was also acting as a consultant for AIG. In fact, as PNC's auditor, E&Y approved PNC's transactions with AIG while at the same time acting as an "accounting adviser" to AIG. E&Y drew up the financial structure for the subsidiaries in question and approved them for implementation by AIG. E&Y also issued a letter that helped AIG pitch its product to banks. On January 29, 2002, PNC announced that the Federal Reserve Board had contacted the Company about accounting inaccuracies and as a result, PNC's financial results for 2Q 01 and 3Q 01 would be restated and its financial results for 4Q 01 would be revised. PNC also stated that the updated financials would result in year-end earnings being reduced $155 million to approximately $412 million, or $1.38 a share. The Company also revealed that these accounting adjustments would cause PNC's nonperforming assets to rise by $125 million to $393 million. In addition, the Company announced that the Federal Reserve Board and the SEC were making inquiries about PNC's transactions and that PNC would cooperate with their investigations. These disclosures shocked the market, causing PNC's stock to close on January 29, 2002 down $5.79 or nearly 10% at $56.08 in extremely heavy trading volume of 6,305,100 shares.