Petróleo Brasileiro S.A. – “Petrobras“ (United States)
Substantial settlement for opt-out group in 2017
Petróleo Brasileiro S.A. – Petrobras (“Petrobras“), one of the largest oil and gas companies in the world and formerly the largest corporation in Brazil in terms of revenue, has been involved in a major corruption and bribery (graft) scandal since 2014, affecting the correctness of its financial statements and public filings for at least the past 6 years. The disclosures of the extent of the bribes and corruption and their impact on the financial condition of the company have caused its U.S. as well as Brazilian equity securities (common and preferred) to lose over 72% since the scandal became public. Senior Petrobras executives have been accused of (and convicted of) accepting bribes from construction companies in exchange for awarding inflated price contracts to them, allowing in return kickbacks to these companies as well as funneling illegal payments to the ruling party. The financial condition of Petrobras was particularly affected by recording construction projects at the (inflated) contract values as assets on its balance sheet (see notes to financial statements), instead of at their actual values, thereby illegally overstating asset values in the billions. This has been corrected in the meantime, by Petrobras’ announcement of corrections in assets to the tune of over $10 billion. Moreover, Petrobras violated its representations to its shareholders concerning its self-imposed Code of Ethics covering anti-corruption and anti-bribery practices. On May 13 and August 20, 2015, DRRT filed cases for various institutional investors against Petrobras and individual defendants in the U.S. District Court for the Southern District of New York for damages resulting from investments in U.S. issues securities (ADR and U.S. bonds). DRRT successfully represented a group of international institutional investors together with U.S. counsel and obtained recovery for its clients that resulted in much earlier payouts to its clients.
Merck & Co. Inc (Vioxx) (United States)
Substantial settlement for opt-out group in 2016
Merck & Co., Inc. (“Merck“) issued numerous statements and filed quarterly and annual reports with the SEC that described Merck’s increasing revenues and financial performance. These statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (i) that the Company improperly minimized and downplayed the effect that safety concerns about VIOXX, the Company’s second-best selling drug, had on sales of that drug, (ii) failed to disclose concerns scientists and physicians working for Merck had about the cardiovascular safety of VIOXX; (iii) failed to disclose the large amount of liability the Company was facing in personal injury and wrongful death lawsuits due to the hazardous nature of VIOXX and that, as a result, Merck’s statements concerning the size of the Company’s revenues, financial results, and future earnings projections were lacking in a reasonable basis at all relevant times. On August 21, 2007 and January 23, 2015, DRRT filed cases for various institutional investors against Merck and Co., Inc. and individual defendants in the U.S. District Court of New Jersey. DRRT successfully represented a group of international and U.S. institutional investors together with U.S. counsel and obtained recovery for its clients that exceeded the class action settlement recovery.
American International Group, Inc. (United States)
Substantial settlement for opt-out group in 2015
The case against American International Group, Inc. (“AIG“) was based upon AIG’s (and its former officers’ and directors’) misstatements about AIG’s exposure to Credit Default Swaps and Residential Mortgage Backed Securities and the overall real estate financing market, all of which materialized in a substantial loss of AIG’s market capitalization, i.e., investor capital, and a bailout of immense proportions by the U.S. government in September 2008. In the wake of the U.S. residential housing and mortgage markets deteriorating in 2007 and 2008, AIG misrepresented to investors that these developments would have no negative impact on AIG or its performance. By January 2008, the losses had risen to $11.5 billion. While these losses clearly were substantial and significant, AIG continued to represent that its available capital would be enough to offset such losses. Only months later, AIG acknowledged that it needed to raise additional capital of $20 billion, an amount that, in the end, would soar to about $80 billion in order to avoid AIG’s outright failure. DRRT was the international liaison counsel for its German investment company client and obtained recovery for its clients that exceeded the class action settlement.
Merck Vytorin (United States)
$215 million class action settlement in 2013
Prices of Merck & Co., Inc. (“Merck“) securities were artificially inflated or depressed as a result of allegedly false statements, non-disclosures, and fraudulent conduct in violation of the federal securities laws in relation to the commercial prospects of its “blockbuster“ cholesterol drug, Vytorin. Merck was accused of having improperly delayed the release of results of drug trials that would have shown effectiveness results that were not in line with the company’s claims in marketing the drug, and that would have resulted in decreased sales of the drug. When the true trial results were ultimately disclosed, the stock price dropped and investors suffered substantial losses. DRRT was the international liaison counsel for its German investment company client and together with the U.S. local lead counsel obtained this successful result in 2013.
Citigroup (United States)
Substantial settlement for opt-out group in 2013
The action alleged that Citigroup concealed the extent of its ownership of toxic assets and the risks associated with them. Citigroup’s disclosure of the real facts, beginning in the fourth quarter of 2007, caused the stock to drop precipitously until 2009. This placed Citigroup in serious danger of insolvency, averted only through a $300 billion emergency government bailout. The shareholder and bondholder class actions against Citigroup did not cover certain claims and securities. Therefore, opt-out claims from the class actions were the only option to maximize a loss recovery and to even assert claims for additional securities. DRRT successfully represented a large group of international institutional investors together with U.S. counsel and obtained recovery for its clients that exceeded the class action settlement recovery.
Bank of America (United States)
Substantial settlement for opt-out group in 2013
On January 1, 2009, BoA merged with Merrill Lynch, which was valued at approximately $24 billion on the date of the shareholder vote on the merger. Prior to the shareholder vote, however, the BoA Proxy Statement knowingly withheld from BoA shareholders the information that Merrill was facing record Q4/2008 losses exceeding $15 billion and that a secret addendum to the merger agreement provided for up to $5.8 billion in bonuses to be paid to Merrill employees prior to the close of the deal. These bonuses eventually totaled between $3-4 billion, which – together with the $15 billion quarterly losses – represented more than 75% of Merrill´s value at the time of the shareholder vote. DRRT represented a large group of institutional investors who either filed an opt-out complaint, entered into tolling agreements with BoA, or notified the claims administrator that they were opting out of the class proceeding (and settlement). DRRT and U.S. counsel successfully represented its clients and obtained a recovery several times that which would have been obtained through regular participation in the class action.
General Motors (United States)
$303 million U.S. class action settlement in July 2008
General Motors (“GM“) and its auditor paid $303 million in a settlement over allegations that GM made material misstatements in its financials between 2000 and 2006. The settlement covered common stock and debt securities and was paid by GM ($277 million) and GM’s outside auditor Deloitte & Touche ($26 million). It was alleged that the defendants issued or caused to be issued materially false and misleading statements to the investing public with respect to the company’s financial performance and condition during the relevant period. The settlement ranked as one of the Top 25 settlements in U.S. securities class action history and was procured by a German mutual fund company. DRRT was liaison counsel to the lead plaintiff from Germany and together with the U.S.lead counsel obtained this result.
Royal Ahold (United States)
$1.1 billion class action settlement in 2006
On February 24, 2003, Royal Ahold announced that it had inflated earnings by at least $500 million. The Company reported that these overstatements of earnings occurred based on conduct at Ahold’s wholly owned subsidiary, U.S. Foodservice, Inc. On February 24, 2003, Ahold also informed investors that Ahold would restate its previously announced revenues because it had improperly reported revenues consolidated from certain joint ventures. Following Ahold’s February 24, 2003 announcement, the value of Ahold common stock and ADRs declined in value by more than 60%. Ahold eventually announced restatements exceeding $24 billion in revenues and $1.1 billion in income. Ahold’s conduct presented a misleading financial picture of Ahold to investors and artificially inflated the price of Ahold’s common stock and ADRs. DRRT successfully brought in a German client who had dealt with one of the investment banks, as a result of which the additional defendant was not dismissed and the settlement pool was increased significantly to reach the $1.1 billion U.S. settlement.