Duke Energy Corp. has agreed to pay $146 million to settle a suit claiming the company misled investors about ousting the former CEO of Progress Energy Inc. following the companies’ $32 billion merger in 2012. The suit was pending in a North Carolina federal court. The settlement, which is still subject to court approval, covers Duke shareholders who bought stock between June 11, 2012, and July 9, 2012 — a week after the merger with Progress closed — including former Progress shareholders who acquired shares of Duke stock directly in the merger of Duke and Progress.
The consolidated suit, filed shortly after Duke and Progress merged in a deal that created the largest utility in the U.S., accused Duke, its top executives and board of directors of keeping investors in the dark about a plan to remove Progress CEO Bill Johnson once the merger was completed. This was a move that also got the attention of North Carolina utility regulators. The merger agreement called for Johnson to serve as CEO of the merged company and Duke CEO Jim Rogers to serve as executive chairman and was approved by shareholders, according to the complaint. Duke’s board conducted the first post-merger board meeting on July 2, 2012, electing Johnson as CEO and then dismissing him in the same session, replacing him with Rogers.
At the time, Rogers said the board was concerned about Johnson’s ability to lead the company, but was under a contractual obligation to get the merger completed. However, the North Carolina Utilities Commission (NCUC) launched an investigation, claiming the merger that was eventually executed was the not the plan the commission had originally signed off on. The panel had questioned Rogers and several other key players over concerns that Duke misled it, as well as potentially the financial markets and other regulators across the country, in order to gain approval for the merger. Duke struck a deal with the NCUC in November in which Rogers agreed to retire at the end of 2013.
Amalgamated Bank, the lead Plaintiff in the investor suit, said that it was pleased to reach a deal in what it claims is the largest securities fraud settlement in North Carolina history. It had this to say in a statement:
This was a brazen case of board malfeasance that shook investors’ confidence and resulted in significant loss of value for the company. As long-term shareholders, we expect better and will continue to take actions to promote stable financial markets and positive returns for our clients and all shareholders.
The case is in the U.S. District Court for the Western District of North Carolina.
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