In Re: Delphi Corporation Securities Litigation ... Delphi Corp (formerly Delphi Automotive Systems)

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Transcript of In Re: Delphi Corporation Securities Litigation ... Delphi Corp (formerly Delphi Automotive Systems)

  • 2:05-md-01725-GER Doc # 45 Filed 03/03/06 Pg 1 of 172 Pg ID 1150

    UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN

    SOUTHERN DIVISION

    IN RE DELPHI CORPORATION SECURITIES, DERIVATIVE & “ERISA” LITIGATION

    MDL No. 1725 Master File No. 05-CV-70882-DT Hon. Gerald E. Rosen Relates to: 05-70882, 05-70940, 05-71030, 05-71200, 05-71249, 05-71291, 05-71339, 05-71396, 05-71397, 05-71398, 05-71437, 05-71508, 05-71620, 05-71897, 05-72198

    CONSOLIDATED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT

  • 2:05-md-01725-GER Doc # 45 Filed 03/03/06 Pg 2 of 172 Pg ID 1151

    I. PREFATORY NOTES ............................................................................................................ vi

    II. INTRODUCTION ....................................................................................................................1

    III. JURISDICTION AND VENUE .............................................................................................3

    IV. PARTIES ..................................................................................................................................3

    A. Plaintiffs ..................................................................................................................3

    B. Defendants ..............................................................................................................4

    V. THE PLANS ..............................................................................................................................8

    A. Nature of the Plans .................................................................................................8

    B. The Plan Documents ..............................................................................................9

    C. Delphi Savings-Stock Purchase Program for Salaried Employees (the “Salaried Plan”) ........................................................................12

    D. Delphi Personal Savings Plan for Hourly-Rate Employees (the “Hourly Plan”) .....................................................................................................15

    E. Delphi Mechatronic Systems Savings-Stock Purchase Program .....................17

    F. ASEC Manufacturing Savings Plan ...................................................................19

    G. The Delphi Common Stock Fund .......................................................................20

    H. The Plans’ Alleged ESOP Status ........................................................................22

    I. GM Stock Funds ..................................................................................................22

    VI. DEFENDANTS’ FIDUCIARY STATUS ............................................................................23

    A. The Nature of Fiduciary Status ..........................................................................23

    B. Delphi ....................................................................................................................24

    C. Directors Defendants ...........................................................................................26

    D. Executive Committee Defendants .......................................................................27

    E. IPC Defendants ....................................................................................................28

    F. Defendant GMIMCo ............................................................................................30

    G. Defendant State Street Bank and Trust Company ...........................................33

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  • 2:05-md-01725-GER Doc # 45 Filed 03/03/06 Pg 3 of 172 Pg ID 1152

    H. ASEC and Mechatronic .......................................................................................34

    VII. FACTS BEARING ON FIDUCIARY BREACH ..............................................................35

    A. Background ..........................................................................................................35

    B. Delphi’s Accounting Scheme ...............................................................................38

    C. The Truth Begins To Emerge .............................................................................50

    VIII. FALSE AND MISLEADING STATEMENTS TO PLAN FIDUCIARIES .............................................................................................................................66

    A. Year-End 1999 ......................................................................................................67

    B. First Quarter 2000 ...............................................................................................68

    C. Second Quarter 2000 ...........................................................................................70

    D. Third Quarter 2000 ..............................................................................................72

    E. Fourth Quarter and Year-End 2000 ..................................................................74

    F. Mid-Quarter Guidance – March 29, 2001 .........................................................77

    G. First Quarter 2001 ...............................................................................................78

    H. Second Quarter 2001 ...........................................................................................81

    I. Third Quarter 2001 ..............................................................................................84

    J. Fourth Quarter / Year End 2001 ........................................................................86

    K. First Quarter 2002 ...............................................................................................90

    L. Second Quarter 2002 ...........................................................................................92

    M. Third Quarter 2002 ..............................................................................................94

    N. Fourth Quarter/ Year-End 2002 .........................................................................97

    O. FirstQuarter 2003 ...............................................................................................99

    P. Delphi Revises Its Earnings Estimates Downward for the 2003 SecondQuarter ..................................................................................................100

    Q. SecondQuarter 2003 .........................................................................................101

    R. ThirdQuarter 2003 ............................................................................................103

    S. Fourth Quarter/Full Year 2003 ........................................................................104

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  • 2:05-md-01725-GER Doc # 45 Filed 03/03/06 Pg 4 of 172 Pg ID 1153

    T. First Quarter 2004 .............................................................................................106

    U. Second Quarter 2004 .........................................................................................107

    V. Third Quarter and Fourth Quarter 2004 ........................................................108

    IX. DELPHI’S HIGHLY RISKY AND ILLEGAL ACCOUNTING AND BUSINESSPRACTICES ..........................................................................................................112

    A. Delphi’s Financial Statements Failed to Comply with GAAP and SEC Regulations Prohibiting False and Misleading Public Filings ..................................................................................................................112

    X. THE DEFENDANTS BREACHED THEIR FIDUCIARY DUTIES ...............................131

    A. The Director Defendants had actual knowledge of the misconduct. .........................................................................................................131

    B. Executive Committee Defendants either had actual knowledge, or had sufficient information so as to be charged with actual knowledge, of the misconduct. ..........................................................................135

    C. The Director Defendants Failed to Disclose the Imprudence of the Investment in Delphi Stock to other Fiduciaries of the Plans. ...................................................................................................................137

    XI. THE RELEVANT LAW .....................................................................................................138

    XII. ERISA § 404(C) DEFENSE INAPPLICABLE ...............................................................140

    XIII. CAUSES OF ACTION .....................................................................................................141

    A. Count I: Breach of Fiduciary Duty of Prudence ............................................141

    B. Count II: Breach of Duty to Act in Accordance with the Terms of the Investment Management Agreement and ERISA ....................148

    C. Count III: Failure to Monitor Fiduciaries ......................................................149

    D. Count IV: Breach of Duty To Disclose and Inform Other Fiduciaries of the Plans Incidental to the Defendants’ Fiduciary Obligations as Fiduciaries of the Plans ..........................................152

    E. Count V: Co-Fiduciary Liability ........................................