Lawsuit reinstated against former Dana executives
5/25/2011A dismissed class-action securities fraud lawsuit against Dana Holding Corp. and two of the Maumee firm’s top former executives was resurrected Wednesday by the 6th U.S. Circuit Court of Appeals.
The original suit was filed in October, 2005 in U.S. District Court in Toledo. It claims that former Chief Executive Michael Burns and former finance chief Robert Richter knowingly misled investors about the company’s financial performance from April, 2004 to October, 2005.
Plaintiffs in the case allege that Mr. Burns and Mr. Richter made positive statements about the auto supplier’s fiscal strength, despite their knowledge of various problems that could cause stock prices to dip.
The suit, filed by shareholder Howard Frank, was one of at least a dozen filed by pension funds and shareholders against officers of the auto-parts supplier after a stock slump and Chapter 11 bankruptcy filing in March, 2006.
The class-action case was dismissed in 2007 by the district court because the plaintiffs did not show that Dana and its executives most likely acted with knowledge of wrongdoing. The circuit court reversed the dismissal because, it said, the evidence shows a possibility that Dana executives acted with intent to mislead investors.
An inquiry by the U.S. Securities and Exchange commission found in 2009 that the Fortune 500 auto parts producer filed fraudulent financial reports in 2004 and 2005 that inflated profits by $88 million before taxes. Four ex-Dana executives were ordered in 2009 by the SEC to pay $400,000 in fines and penalties because of fraudulent accounting practices, but neither Mr. Burns nor Mr. Richter were penalized.