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New York (March 12, 2003) -- Numerous years of legal strife concerning Rite Aid Corp. and Oxford Health Plans Inc. audits are finally coming to a close after KPMG's $200 million settlement agreement with respective litigants. Now all that remains is court and litigant approval that is still a few months away."It was announced that we have an agreement and we are now working on formalizing everything," said Melvin Weiss, senior partner at Milberg Weiss Bershad Hynes & Lerach – the firm representing litigants in both suits. "We still need to give notice to the class and in the Oxford case particularly, we are trying to schedule a fairness hearing on June 11. I’m not positive on the Rite Aid suit."
David Bershad, lead attorney on the Rite Aid class action, was unavailable for comment at press time.
The Big Four accounting firm agreed to dish out $125 million to settle class action lawsuits related to its audit of Rite Aid, which stumbled through an accounting scandal in the late 1990s, when it overstated profits by $1.6 billion. The firm also said it will pay $75 million to settle lawsuits related to its audit of Oxford Health, an issue that stretches back six years to computer system error that left the company delinquent in paying doctors and hospitals and put it behind collecting premiums from customers.
KPMG denied wrongdoing in both cases. The settlement ranks among the largest KPMG has agreed to pay out so far.
"Our decision to settle these matters is based on practical business reasons, and saves the firm from years of protracted and distracting legal battles, with the attendant direct and indirect costs," according to a KPMG statement.
In June 2002, regulators charged former Rite Aid executives with accounting fraud over two years ending in 1999 and accused them of falsely reducing the amount they owed suppliers by reporting goods were either damaged or outdated.
Rite Aid last year settled a probe into its accounting practices by paying its shareholders $45 million in cash and $155 million in stock or notes, without admitting or denying any wrongdoing, a company spokeswoman confirmed.
Oxford Health also agreed last year to pay $250,000 to settle charges with regulators who accused the firm of inadequate cooperation during their investigation into the company's failure to restate second quarter results in 1997 to correct the double counting of $25 million in revenue. KPMG said it did not audit or review Oxford's quarterly results and that the matter was addressed before it completed its year-end audit.
--Seth Fineberg
