Delphi Corporation is an auto parts manufacturer.
The original Complaint charges Delphi and certain of its officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. Specifically, the Complaint alleges that Defendants, during the Class Period, issued a series of material misrepresentations to the market concerning the Company's financial condition thereby artificially inflating the price of Delphi's publicly traded securities. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to Defendants or recklessly disregarded by them: (1) that improper accounting for off-balance sheet financing transactions in 2000 resulted in the Company overstating cash flow from operations, determined in accordance with generally accepted accounting principles (GAAP), for that year by approximately $200 million; (2) that the Company used sham sales of assets and other improper accounting maneuvers to inflate reported pretax earnings by a combined total of $166 million for the years 1999 to 2001. These moves increased cash flow from operations by a total of $446.5 million for 1999 through 2003; (3) that the Company during the Class Period prematurely recognized revenue for technology contracts and rebates when it should have spread them over the life of the contract. Other times it improperly capitalized expenses over time, rather than recognizing them immediately. It also boosted cash flow from operations and pretax earnings by claiming it sold assets and inventory that it had actually agreed to buy back later;(4) that the Company's financial statements were not prepared in accordance with Generally Accepted Accounting Principles ("GAAP"); (5) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (6) that as a result, the value of the Company's net income and financial results were materially overstated at all relevant times.
Further, on or about October 18, 2004 (the "October 8-K"), Delphi announced that the Audit Committee of the Company's Board of Directors was conducting an internal review into the accounting treatment accorded to certain transactions with suppliers, including those for information technology services. The internal review was initiated in response to an investigation commenced by the staff of the Securities and Exchange Commission ("SEC") that was disclosed on a Form 8-K filed on September 29, 2004. The decision to delay filing of the Form 10-Q was made in light of the ongoing SEC investigation and internal review, as well as the fact that Deloitte & Touche LLP ("Deloitte"), the Company's independent registered public accounting firm, had informed the Company that due to the ongoing status of the internal review by the Audit Committee of the Board of Directors, Deloitte has been unable to complete its review of the unaudited Consolidated Financial Statements for the three and nine months ended September 30, 2004.
Then on March 3, 2005, Delphi announced that "Vice Chairman and Chief Financial Officer, Alan S. Dawes, is leaving the Company and has resigned from its Board of Directors and its strategy board. Additionally, the Company stated: "Mr. Dawes agreed to resign after the audit committee expressed a loss of confidence in him[.]"
Additionally, the Company stated it would restate results after finding accounting errors from 1999 to 2004. Delphi stated that it overstated cash flow from operations by $200 million in 2000 because of errors in off-balance sheet financing and overstated pretax income by $61 million in 2001 because of improper accounting for rebates. As a result, financial statements from 2001 on cannot be relied upon. Delphi had not yet determined which prior results will have to be restated, but it expects to complete the changes by June 30. News of this shocked the market. As a result, shares of Delphi, on March 4, 2005, fell $0.91 per share, or 14.29 percent, to close at $5.46 per share on unusually high trading volume.
Note: this class action lawsuit was filed on behalf of all securities purchasers Delphi Corporation (f/k/a/ Delphi Automotive Systems).
As summarized by the Company’s FORM 10-Q for the quarterly period ended June 30, 2007, on September 30, 2005, the court-appointed lead Plaintiffs filed a consolidated class action Complaint (the “Amended Securities Action”) on behalf of a class consisting of all persons and entities who purchased or otherwise acquired publicly traded securities of the Company, including securities issued by Delphi Trust I and Delphi Trust II, during a class period of March 7, 2000 through March 3, 2005. The Amended Securities Action names several additional Defendants, including Delphi Trust II, certain former directors, and underwriters and other third parties, and includes securities claims regarding additional offerings of Delphi securities. The securities actions consolidated in the United States District Court for Southern District of New York (and a related securities action filed in the United States District Court for the Southern District of Florida concerning Delphi Trust I) were subsequently transferred to the United States District Court for Eastern District of Michigan as part of the Multidistrict Litigation. The action is stayed against the Company pursuant to the Bankruptcy Code, but is continuing against the other Defendants. As of June 12, 2006, the parties’ pleadings on Defendants’ motions to dismiss the Amended Securities Action were filed and were awaiting the Court’s ruling. As of January 2, 2007, the parties’ pleadings on Plaintiffs’ motion seeking leave to file an amended securities fraud Complaint were filed and were awaiting the Court’s ruling. On February 15, 2007, the United States District Court for Eastern District of Michigan partially granted the Plaintiffs’ motion to lift the stay of discovery provided by the Private Securities Litigation Reform Act of 1995, thereby allowing the Plaintiffs to obtain certain discovery from the Defendants. On April 16, 2007, by agreement of the parties, the Court entered a limited modification of the automatic stay, pursuant to which Delphi is providing certain discovery to the lead Plaintiffs and other parties in the case.
In an article dated August 20, 2007, a federal judge overseeing the multidistrict securities dispute between bankrupt auto parts maker Delphi and its shareholders has approved settlements recommended by a court-appointed special master, leaving only a few Defendants remaining in the case. Judge Gerald Rosen of the U.S. District Court for the Eastern District of Michigan approved the settlements reached between the shareholders and many parties under the guidance of special master Layn R. Phillips. Now only five Defendants remain: consulting firm BBK Inc., Deloitte, JPMorgan Chase & Co., State Street Bank & Trust Co. and supplier Setech Inc. The multidistrict case is a consolidation of a wave of shareholder suits that were filed after the embattled Delphi revealed in March 2005 that many of is financial statements were incorrect. Plaintiffs in the litigation, which include state pension funds in Oklahoma and the Public Employees' Retirement System of Mississippi, have accused the bankrupt company of inflating financial results in violation of securities laws.
According to press release dated September 3, 2007, Delphi and former company executives, along with Merrill Lynch and other underwriters, will pay $342.1 million to settle a securities fraud lawsuit brought by investors of the Company. The settlement filed in U.S. court in Detroit includes $295.1 million to investors in shares and bonds and $47 million to current and former Delphi employees who invested in the Company through their retirement plans. … Investors will receive a $204 million stake in the reorganized Delphi and about $90 million in cash from other Defendants and insurance carriers, Delphi said in the statement. The retirement plan Plaintiffs will receive a $24.5 million interest in the reorganized Delphi as it leaves bankruptcy and $22.5 million in cash, according to court filings. The underwriters will pay $1.5 million of the settlement with investors, with $88.6 million coming from Delphi insurance carriers, according to the court documents. The retirement plan Plaintiffs did not sue the underwriters.
In a press release dated September 14, 2007, the Court also preliminarily approved a Settlement providing for a recovery with a potential value of $295,100,000, comprised of the following payments to be made by or on behalf of the Settling Defendants (defined below): i) a claim in the Delphi Bankruptcy Case with a potential value of $204,000,000 in Delphi Plan Currency; ii) $78,600,000 in cash on behalf of the Delphi Officer and Director Defendants; iii) $1,500,000 in cash by or on behalf of certain of the Underwriter Defendants; and iv) contingent payments of a maximum of $11,000,000, also to be paid on behalf of the Delphi Officer and Director Defendants (collectively, the "Settling Defendants"). … A hearing will be held before the Honorable Gerald E. Rosen in the United States District Court for the Eastern District of Michigan on November 13, 2007 to determine whether: (1) the proposed Settlement should be approved by the Court as fair, reasonable and adequate; (2) the proposed plan of allocation should be approved by the Court as fair and reasonable; (3) co-lead Counsel's application for an award of attorneys' fees and reimbursement of expenses should be approved; (4) the claims against the Settling Defendants should be dismissed with prejudice; and (5) such other matters as the Court deems appropriate to rule upon. The Settlement does not resolve lead Plaintiffs' claims against Non-Settling Defendants JP Morgan Chase & Co. (as successor in interest to Bank One Corporation), SETECH Inc., BBK Ltd. and Deloitte & Touche LLP, as further described in the Notice. Therefore, lead Plaintiffs will continue to prosecute their claims against the non-settling Defendants.
In an article dated December 27, 2007, an agreement in principle has been reached with Delphi's former outside auditor, Deloitte, to settle claims against the auditing firm for $38,250,000 in cash. … The settlement is conditioned on approval by Judge [Gerald E.] Rosen, who will pass on the settlement after the members of the Class are given appropriate notice of the settlement and an opportunity to be heard.
According to a press release dated January 11, 2008, Delphi Corp. investors won final court approval of a potential $284.1 million settlement of a class-action lawsuit filed against the largest U.S. auto-parts maker, former and current executives and Company underwriters. Investors sued in March 2005, claiming Company officials "engaged in a wide-ranging fraudulent scheme" to inflate share prices by issuing misleading earnings statements. Troy, Michigan-based Delphi filed for bankruptcy about seven months later. U.S. District Judge Gerald Rosen in Detroit yesterday granted final approval of the settlement reached in August. He also approved a separate $47 million settlement for current and former employees who invested in Delphi through their retirement plans. The settlements will require approval from the bankruptcy court. … Rosen granted the request by shareholders' lawyers for 18 percent of the eventual recovery as attorneys' fees, plus an additional $1.3 million in costs. This would lead to a possible $51.1 million in fees.
On February 01, 2008, a Lead Plaintiffs' Notice of Voluntary Dismissal Under FED. R. CIV. P. 41(a)(1) Against BBK, Ltd., Setech, Inc. and JPMorgan Chase & Co. (As Successor To Bank One) was filed by the court.
According to a press release dated February 20, 2008, the Court also preliminarily approved a settlement providing for a recovery of $38,250,000 ("Deloitte & Touche Settlement Amount") to be paid by Deloitte. … A hearing was to be held before the Honorable Gerald E. Rosen in the United States District Court for the Eastern District of Michigan, Southern Division on April 29, 2008 to determine whether: (1) the proposed settlement should be approved by the Court as fair, reasonable and adequate; (2) co-lead Counsel's application for an award of attorneys' fees and reimbursement of expenses should be approved; (3) the claims against Deloitte should be dismissed with prejudice; and (4) such other matters as the Court deems appropriate to rule upon.
On June 26, 2008, Order of Final Approval of Settlement and Final Judgment was granted by the court. An Order Awarding Attorneys’ Fees and Expenses was also granted by the court.
On March 18, 2009, an Opinion and Order Granting State Street Bank and Trust Company’s Motion for Summary Judgment and Denying Erisa Plaintiffs’ Motion for Partial Summary Judgment and a Final Judgment was filed in which the Plaintiffs’ claims against State Street Bank and Trust Company were dismissed, in their entirety, with prejudice.
On November 20, 2009, an Order and Final Judgment amended an earlier Order and Final Judgment, dated January 23, 2008.
On July 09, 2010, an Order Approving Distribution Plan for the Net Settlement Funds was issued by the Court.
On September 02, 2010, a Notice of Appeal was filed by the Defendants in Federal Appeals Court.
On October 14, 2010, an Appellate Order was issued by the United States Court of Appeals for the Sixth Circuit, pursuant to rule 45(a), thereby dismissing the appeal for want of prosecution.
On January 26, 2012, a Final Distribution Order of the settlement was issued by the Court.
