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$141M Sunbeam Fraud Case Settled

Aug 9, 2002 | AP

A federal judge signed off Friday on a $141 million settlement of a class-action fraud suit that investors who lost money on Sunbeam Corp. stock brought against the bankrupt appliance maker.

The suit accused the Boca Raton-based maker of Sunbeam, Oster, Mr. Coffee, First Alert and other brands and its officers of inflating stock prices and misleading investors about the company's sales and earnings in the 18-month period leading up to the ouster of chairman and chief executive Al Dunlap in June 1998.

U.S. District Judge Donald Middlebrooks signed the settlement agreement, which will provide about $106 million for investors. Attorneys estimated investors will be compensated for 12 percent to 15 percent of their losses.

"We're pleased that we were able to get as much as we did," said Robert Kornreich, a New York attorney for investors.

Tens of thousands of shareholders have filed claims for their share of the settlement, and the last claims must be postmarked by Sept. 6.

Middlebrooks also approved giving attorneys a 25 percent share of the settlement, or about $35 million, in fees.

The bulk of the settlement is coming from Sunbeam's accountant, Arthur Andersen. The accounting firm, which was convicted in June on a criminal charge for shredding Enron audit documents, agreed to pay $110 million as part of a Sunbeam settlement last year.

Attorneys said they already have Arthur Andersen's money in hand and will begin distributing it in about 30 days.

Sunbeam was forced to restate financial results for 18 months before Dunlap was fired in June 1998. Dunlap, known as "Chain Saw Al" for his history of slashing jobs, will pay $15 million in the agreement.

"It's safe to say that Mr. Dunlap is pleased this matter is behind him," said Don Zakarin, his attorney.

The settlement also includes money from insurers with policies covering company officials, including $13.5 million from Warren, N.J. based Chubb's Executive Risk Insurance Co. and Federal Insurance Co., and $2 million from Cincinnati-based Great American Insurance Group.

Former executive vice president Russell Kersh agreed to pay $250,000.

None of the settlements contained admissions of wrongdoing.

Sunbeam's shares fell from $11.25 in June 1998 to 73 cents in May 2001 after the Securities and Exchange Commission charged Dunlap with inflating the company's earnings. Investors say they lost $800 million on their stock due to Sunbeam's fraudulent business practices.

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