Chicago Bridge & Iron Co. N.V.
SRKW served as co-lead counsel in this securities class action filed on behalf of investors in Chicago Bridge & Iron Co. N.V. (“CB&I” or the “Company”), a global engineering, procurement and construction company. The Firm represented co-lead plaintiff Fortis Investments, a major European asset management company.
SRKW negotiated a settlement of the action consisting of $10.5 million plus CB&I’s agreement to implement certain corporate governance reforms pertaining to insider trading, which was one of the core elements of wrongdoing alleged in the action. Following a June 3, 2008 Fairness Hearing, the Court approved the settlement. (To review information regarding the settlement, please visit www.chicagobridgesecuritiessettlement.com.)
The Complaint in the action alleged that from March 9, 2005 through February 3, 2006, CB&I manipulated the recordation of costs of projects and revenues, which deceived the investing public regarding its business, operations, management and the intrinsic value of CB&I common stock, and caused investors to purchase CB&I shares at artificially inflated prices.
The Complaint alleged that defendants knew, or were severely reckless in not knowing, that the Company’s earnings and revenues were significantly overvalued on its balance sheet. Throughout the Class Period, CB&I experienced earnings problems stemming from, inter alia, cost overruns on construction projects, unapproved change orders, and losses due to derivative contracts. However, instead of disclosing these problems to CB&I’s shareholders, defendants stated that the Company had no foreseeable problems that would affect its earnings, that it had sufficient internal accounting and control policies, and that it would continue to meet its prior earnings guidance. Additionally, the Company stated that it was complying with Generally Accepted Accounting Principles (“GAAP”) as well as its own internal accounting procedures. Unfortunately for CB&I shareholders, these rosy statements and financial announcements were not accurate.
The truth concerning the actual performance and condition of the Company began to come to light in a series of partial disclosures beginning on October 26, 2005 when the CB&I disclosed that it would have to delay the announcement of its financial results for the third quarter of 2005. Shortly thereafter, on October 31, 2005, the Company disclosed that the delay had been “precipitated by a memo from a senior member of CB&I’s accounting department alleging accounting improprieties, including the determination of claim recognition on two projects and the assessment of costs to complete two projects.” The Company also disclosed that its Audit Committee had commenced an investigation into the matter. Less than two weeks later, on November 11, 2005, the Company was forced to announce that it would also be unable to timely file its Form 10-Q for the third quarter of 2005 with the SEC as a result of its continuing investigation into CB&I’s accounting improprieties.
The fraud was finally disclosed when, on February 3, 2006, the Company shocked the market by announcing that it had fired its Chairman, Chief Executive Officer and President, Gerald Glenn, as well as its Executive Vice President and Chief Operating Officer, Robert B. Jordan. The Company also announced that it expected to issue revised guidance regarding its operations for the year ended December 31, 2005 and, for the first time, disclosed that “[a]ll previous earnings guidance issued by the Company for 2005 is no longer operative.” These stunning disclosures sent a tidal wave through the market and the price of CB&I shares collapsed, falling 23%.