A $193 million settlement may be close for thousands of PNC Financial Services Group shareholders who joined a class-action lawsuit stemming from a 2001 accounting scandal.
A federal judge will have to approve an agreement between the investors' lawyers and the bank that would add $36.6 million to an already-created $154.4 million restitution fund. Another lawsuit is pending against Big Four firm Ernst & Young, which reviewed the bank's controversial loan sales.
In 2001, PNC attempted to rid its balance sheets of more than $760 million in bad corporate loans, selling the loans to partnerships it created with insurance company AIG, and removing them from its balance sheet. By not counting the depreciation of the bad assets, PNC was able to inflate its earnings for much of 2001.
The Federal Reserve later forced PNC to restate its earnings and list the losses on its balance sheet. The restated earnings were $155 million less than first reported.
PNC has already been ordered to contribute $90 million to the settlement fund, and AIG will pay $4 million toward the settlement plus more than $40 million in discharged fees it had earned for the loan transactions. PNC paid $25 million to the Justice Department to settle charges of conspiracy to commit securities fraud in June 2003, and several executives left the bank.If approved, the fund would be distributed to about 73,000 shareholders who bought PNC stock between July 2001 and July 2002. AIG has not yet been sued, though a suit is likely.
