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Insurance companies covering former Montana Power Co. directors and officers have offered to pay $67 million to settle a shareholders’ lawsuit over the sale of the utility’s assets, attorney Frank Morrison Jr. confirmed July 13.
The settlement offer “is a small step, but a very significant one because it shows the credibility of our case,” Morrison said. “If we weren’t right about this, they wouldn’t have paid us 90 percent of their insurance coverage.”
Shareholders sued Montana Power Co., the investment firm Goldman Sachs Group Inc., and the New York law firm Milbank, Tweed, Hadley & McCloy LLC. The suits claimed the sale was illegal because it was done without shareholder approval.
“They didn’t go to shareholders until the last part,” Morrison said.
The settlement does not deal with the suit against the latter two firms, which provided financial and legal advice that Montana Power used in selling its assets.
Attorneys for Goldman Sachs and Milbank Tweed could not be reached for immediate comment.
Montana Power invested $1 billion in subsidiary Touch America, a telecommunications company that has since filed for bankruptcy.
The suit says shareholders lost $3 billion in stock value as a result of the transition from a stable utility to failed telcom. Montana Power Co. stock traded as high as $64 a share in March 2000, but the Touch America stock is now virtually worthless.
Morrison said it could be late this year before shareholders receive their portion of the settlement. He said the offer has to be approved in the Touch America bankruptcy case and they’re also submitting it to the court handling the bankruptcy of NorthWestern Corp., parent company of NorthWestern Energy, which purchased Montana Power’s transmission properties.
The settlement also must be approved by U.S. District Judge Sam Haddon, in whose court the lawsuit was filed. Haddon will set attorney’s fees for the four firms representing the class.
Then, attorneys will send notices to Montana Power shareholders as of Dec. 12, 1999, the date the generation facilities were sold, to ask if they approve the settlement or want to opt out.
“We probably will get those notices out, hopefully in September, for a hearing in probably October,” said Morrison, who expects that shareholders could receive a distribution in November.
He said 50,000 to 60,000 shareholders may be affected by the settlement, but that is just a “wild estimate” until attorneys get an official list.
Keith Strong, attorney for former Montana Power and Touch America directors not employed by the company, declined to comment on the agreement.
Attorney Dana Christensen, who represented top executives of the company, told Lee Newspapers he considers the agreement “fair and equitable.”
“There will not be an admission of guilt on the part of any of the defendants,” he said. “This will be your typical settlement where the parties are buying their peace and resolving claims that are being disputed.”
Morrison said $35 million of the settlement came from Associated Electric & Gas Insurance Services Ltd., while The Hartford and Chubb Insurance Group together had $40 million in coverage. Of the $75 million pot, the insurance company attorneys received $3 million and the settlement offer was for $67 million, which Morrison believes is the second-highest settlement involving a Montana case.
“I went to California not expecting the case to settle,” Morrison said, “but I was pleasantly surprised because there are a lot of people in their 70s in this action and I would like to see if we can resolve this and get some money to these people before they die.”
Morrison said he hopes the settlement would make Goldman Sachs and Milbank, Tweed consider negotiating, as well. “They have had a stand-offish atttitude up to now,” he said. “I’m hopeful the rest of the people wake up and come to the table now.”
He said Milbank, Tweed has $150 million in insurance coverage and he believes Goldman Sachs is self insured, with $70 billion in assets. The suit against those firms seeks more than $3 billion in damages.
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