STAMFORD, Conn. - Cendant Corp. has agreed to pay a total of more than $2.38 billion in cash to several large shareholders to settle claims arising from financial irregularities at two of Cendant's predecessors, CUC International and its CMS division. The settlement, which was presented in New Jersey Federal Court, also included a number of corporate governance reforms.
The shareholders include the co-lead plaintiffs, the $115 billion New York State Common Retirement Fund, Albany; the $107.3 billion New York City Pension Funds; and the $155 California Public Employees' Retirement System, Sacramento.
The settlement is over three times the highest ever obtained in a securities class-action case, according to Max Berger, lead counsel for the shareholders. It was also the first time any of the three pension systems had filed to be lead plaintiff in a class-action suit, since the passage of the Private Securities Litigation Reform Act of 1995, which favors institutional plaintiffs.
At the time of the filing, the pension funds estimated they had lost around $89 million in total as a result of Cendant's alleged misstatements. Cendant's stock price fell more than 50% after the accounting scandal was disclosed.
H. Carl McCall, sole trustee for the New York State pension fund, estimated the cash settlement will allow the shareholders to recover 40% to 60% of their losses. Collectively the co-lead plaintiffs owned 11.7 million shares of Cendant when they joined the lawsuit in June 1998. The funds continue to pursue claims against Ernst & Young, Cendant's former outside auditor.
