HOUSTON, Texas - Dynegy has reached a $30.8 million settlement in principle with employees who sued over lost retirement savings.
Under terms of the tentative agreement, Dynegy employees who held or invested in company stock from April 27, 1999, through Jan. 30, 2003, will share in the funds. After attorney fees, which could swallow up as much as 28 percent of the settlement, employees may split $22.1 million.
While the lawsuit was not seeking a specific dollar figure in damages, attorneys for the shareholders note that the plan held $58 million worth of Dynegy stock in January 2002 but only $13 million one year later.
The settlement could affect between 4,500 and 5,000 current and former Dynegy employees.
They will have cash deposited into their 401(k) accounts based on the size of their holdings and the size of their losses.
The settlement must be approved by a judge before it can be finalized. A fairness hearing is scheduled for Dec. 10 before U.S. District Judge Sim Lake.
"There are a lot of companies where the retirees have lost a lot of money and the companies do not make amends," said Lynn Sarko, an attorney with Keller Rohrback in Seattle who represented the shareholders. "I commend Dynegy for trying to fix this problem."
The lawsuit claims Dynegy and the directors who ran the company's retirement funds improperly permitted investment in Dynegy stock when it was imprudent to do so. The company and the current and former managers failed to disclose to the retirees the true nature of the company's financial statements, round-trip trade transactions, gas price index reporting and a transaction called Project Alpha.
This misinformation caused the company's stock price to collapse and wipe out millions of dollars in value in Dynegy stock that employees held in their retirement accounts.
Dynegy will neither admit nor deny wrongdoing as part of the settlement.
The cash for the settlement will come from a number of insurance policies Dynegy has for just such purposes. Federal Insurance Co. will pay $10 million of the settlement, Travelers Casualty and Surety Co. of America will pay $15 million and Energy Insurance Mutual Ltd. will pay $5.8 million.
A shareholder lawsuit against Dynegy and its former executives, bankers and accountants is still before Lake.
Earlier this month he narrowed the scope of the suit by dismissing some of the outside board members from the case and dropping a number of the claims against certain executives.