Deloitte & Touche and its audit client General Motors agreed to settle a securities class-action lawsuit for a total of $303 million.
GM will pay $277 million as part of the settlement, while Deloitte will contribute $26 million. The case stems from claims that GM issued a series of false and misleading statements to investors about the automaker's financial health going back to 2000.
The settlement requires approval by Judge Gerald Rosen of the Eastern District of Michigan, who has been overseeing the case. Lead plaintiffs in the case were Deka Investment GmbH, and Deka International S.A., a pair of Luxembourg-based funds managed by Germany's DekaBank.
"We think this is an excellent recovery for the class in light of the current economic climate and in light of the particular difficulties the automotive industry is facing," said James Sabella, an attorney with Grant & Eisenhofer, one of the law firms representing the plaintiffs.
GM said in a filing that it plans to record a charge of $277 million in the quarter ended June 30, 2008, but added that a portion of the settlement costs may be covered by insurance. Deloitte did not respond to a request for comment.
The complaint alleges various violations of generally accepted accounting principles, including an allegation that GM accelerated its recognition of income instead of spreading it out over a period of time. GM also allegedly took several items of income that should have been described as extraordinary income and instead folded them into regular income. The plaintiffs also claimed that GM did not adequately describe the full extent of its benefit obligations to former GM employees if its Delphi spin-off went bankrupt, as it did in 2005. The plaintiffs claimed that Deloitte nevertheless issued a clean audit opinion.
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