The suit claims that the garbage hauler failed to properly disclose serious problems related its 1998 merger with USA Waste Services to its shareholders.
In 1999 the merged company became embroiled in an accounting scandal and had to restate financial results for several quarters – its stock price fell from highs of around $56 to lows of around $13.
The suit also charges that a number of company officials engaged in insider trading during 1999.
Since then the company has fired its top management and begun working to eliminate the problems that led to the suit. It has also sold off a slew of businesses acquired during an aggressive expansion spree.
The class covered by the agreement, the third largest securities class action settlement in US history, consists of all buyers of the group?s securities, including stock, bond or call options, or sellers of its put options, between June 11, 1998 and November 9, 1999.
As of March 2001, there were 623 million shares of Waste Management stock issued and outstanding, with shareholders in all 50 states, and as of October 12, 2001, the $20 billion Connecticut state pension fund owned 455,862 shares, with a value of $12.4 million.
Corporate Governance Reforms
The settlement, which is subject to the approval of the court, also included a series of reforms in the company?s corporate governance policies advocated by Connecticut Treasurer Denise Nappier in accordance with the Treasury?s proxy voting guidelines.
The reforms include greater independence for the garbage hauler?s audit committee and enhanced accountability shareholders with respect to corporate management.
Members of the audit committee will now be required to be five years removed from employment with the company, rather than the current three years.
The company also agreed to recommend to shareholders that their entire Board of Directors be elected annually, replacing the current system of staggered terms, with one-third of the board being elected each year.
In a related malpractice suit, accounting firm Arthur Andersen will pay Waste Management a $20 million settlement.