The New York finance company iStar Financial Inc. has reached a $29 million settlement of a lawsuit accusing it of concealing the impact of deteriorating credit market conditions from investors who participated in a 2007 stock offering.
About $27 million will be paid by insurers on behalf of both the company and officials including Chief Executive Jay Sugarman, while iStar will pay $2 million, settlement papers filed late Friday with the U.S. district court in Manhattan show.
iStar continues to deny the plaintiffs’ allegations.
Shareholders had sued iStar over an 8 million share offering in December 2007 at $28.41 per share that netted the company about $218 million.
Less than three months later, iStar reported a $134.9 million charge related to two deteriorating credits, as well as a $113 million increase in loan loss reserves.
After this disclosure, the share price fell to $13.98, less than half what investors had paid in the stock offering.
Lead plaintiffs in the case are Citiline Holdings Inc. and the Plumbers’ Union Local No. 12 Pension Fund in Boston.
The settlement requires court approval, and also resolves claims against iStar underwriters Bank of America Corp., Citigroup Inc., Deutsche Bank AG, JPMorgan Chase & Co., UBS AG and Wells Fargo & Co.
Lawyers for the plaintiffs plan to seek fees equal to 30 percent of the settlement fund, plus $325,000 for expenses, both to be paid from the settlement fund.
Shares of iStar closed Friday at $7.38. The case is Citiline Holdings Inc et al v. iStar Financial Inc. et al, U.S. District Court, Southern District of New York, No. 08-03612.
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