GE Securities Class Action Winds Down with $40 Million Deal
After more than four years of litigation, General Electric Company has agreed to pay $40 million to settle a proposed class action accusing the company and its executives, including CEO Jeffrey Immelt, of misleading investors about the company's exposure to subprime mortgages and other risky investments during the financial crisis.
A group of investor plaintiffs led by the State Universities Retirement System of Illinois announced the deal in a filing Monday with U.S. District Judge Denise Cote in Manhattan. Lawyers for the plaintiffs at Berman DeValerio and Lowey Dannenberg Cohen & Hart wrote that the settlement came about after the parties agreed in January to a second round of mediation with retired California state court judge Daniel Weinstein. GE and two executives, Immelt and CFO Keith Sherin, were represented by Weil, Gotshal & Manges. The proposed settlement contains no admission of liability or wrongdoing.
"This substantial proposed settlement represents an excellent result for the Settlement Class, particularly given the numerous and substantial risks the Lead Plaintiff faced in this litigation," Joseph Tabacco, Jr. of Berman DeValerio wrote in urging the judge to approve the deal. At the time of the settlement, a motion was pending before Judge Cote for judgment on the pleadings by GE, Immelt and Sherin.
The case has taken several twists and turns since the investors first sued in March 2009, claiming they were duped into investing in a $12 billion GE offering. U.S. District Judge Richard Holwell, allowed the case to proceed in January 2012, citing, among other things, passages from Treasury Secretary Hank Paulson's memoirs detailing a private conversation between Paulson and Immelt concerning GE's problems selling its commercial paper. After Holwell resigned from the bench the next month, Cote took over and significantly trimmed the case in April 2012, dismissing all defendants except for GE, Immelt and Sherin. Most notably, Cote dismissed all 26 underwriter defendants from the case, including Barclays Capital, Citigroup Global Markets, Goldman Sachs, Morgan Stanley and J.P. Morgan Securities. The underwriters were defended by Willkie, Farr & Gallagher.
In a statement, plaintiffs lawyer Tabacco praised his client and called the settlement "the best recovery possible for the class, given the risks of presenting a case of such extreme complexity to a jury at trial."