A judgment in the amount of $200 million against the former CEO and CFO of Safety-Kleen Corporation, a hazardous waste management company formerly located in Tooele’s County’s west desert, was awarded Monday to institutional investors in the company. The judgment, which stemmed from the company’s issuance of false financial statements in the late 1990s, was granted following a seven-week jury trial in the District of South Carolina.
In addition to the $200 million judgment, Safety- Kleen’s former auditor, PricewaterhouseCoopers, along with the company’s former directors and officers, agreed to pay an additional $84 million to the investor group.
The litigation first arose when Safety-Kleen filed for bankruptcy in June 2000. In September of that year, assets of the Tooele County hazardous waste management facility were purchased by Clean Harbors, Inc., according to Gary Mossor, Clean Harbors marketing manager for the western United States.
According to Clean Harbors Web site, the company collects, transports, treats and disposes of hazardous waste including chemical and laboratory waste — but not nuclear waste.
Clean Harbors is in no way affiliated with Safety- Kleen, Mossor told the Tooele Transcript-Bulletin Tuesday morning.
The institutional investors of Safety-Kleen, led by American High Income Trust, were purchasers of Safety-Kleen’s high yield debt. Claims were brought against the directors, officers and auditors for filing false registration statements and for violating federal anti-fraud provisions.
Prior to Monday’s court decision, Safety-Kleen’s former CEO and CFO had pleaded guilty to criminal indictments. The duo had also previously been fined and barred by the Securities Exchange Commission (SEC) from ever holding office in a public company.
Investors claimed that Pricewaterhouse Coopers, which had been Safety-Kleen’s outside auditor at the time bonds were issued for the company, certified false financial statements as part of the company’s registration documents for its bond offerings.
Monday’s victory for investors in Safety-Kleen was only the fourth securities fraud case to reach trial since passage of the Private Securities Litigation Reform Act of 1995. Lead prosecutor in the case, Stuart Grant of Wilmington, Del., along with a representative of Grant & Eisenhofer, a public accounting firm based in New York, said they were “extremely pleased” with Monday’s verdict.
Trial in the case began in early March. Prosecutor Grant said the judgment against Safety- Kleen recovered approximately 30 percent of his clients’ losses from the outside directors and auditors, as well as a judgment for the remaining 70 percent against the company’s top two management insiders.
“Not only was this an excellent economic recovery, but it should send a message loud and clear to auditors and audit committees that they must take a pro-active role to prevent fraud,” Grant wrote in a press release. Chief Judge Joseph F. Anderson of the District of South Carolina, noted the difficulty of presenting securities trials to a jury. The judge stated that “Congress and the Appellate Courts had given little guidance to the trial courts as to how to present securities actions, particularly complicated class cases, to a jury.”
The settlement not only covered the SEC actions case, but also 32 individual actions brought by the institution investors under the Exchange Act.
PricewaterhouseCoopers was represented by the law firm of Gibbon Dunn & Critter. The outside directors were represented by Sidney Austin Brown and Wood as well as two other law firms.
A Safety-Kleen Web site states that since filing bankruptcy in 2002, the company has recycled itself as a private company with a new name — Safety-Kleen Systems. Although the company now operates a network of 200 service and recycling centers throughout North America, it’s former Tooele County site is now owned by Clean Harbors.
Safety-Kleen System’s web site states that the company works with auto shops, government agencies, and large corporations to process, recycle and dispose of a large range of hazardous and non-hazardous wastes including oil, brake fluid, oily rags and antifreeze.
The company also provides specialty services such as parts cleaning and claims to be the largest recovery and recycling company for used oil products in the United States.