Owens Corning: lawsuit by shareholder alleges management fraud

A New York City holder of Owens Corning stock has filed an investment fraud lawsuit against the comany“s former CEO, Glen Hiner and four other former or current OC officials, alleging that they were …

A New York City holder of Owens Corning stock has filed an investment fraud lawsuit against the comany“s former CEO, Glen Hiner and four other former or current OC officials, alleging that they were aware thethe company“s financial situation was far worse than the public did before the firm filed for bankruptcy on 5 October 2000. However the filing may not be in time to beat a 2 year limit on claims. It is the first such shareholder lawsuit against OC officers, and it is asking for class-action status, which will allow other shareholders to seek damages. Of crucial importance to the further progress of the lawsuit will be whether the filing in the final week of January 2003 in U.S. District Court in Toledo is too late, given that a two-year statute of limitations exists on shareholder claims. Robert Greenburg filed the lawsuit suit against Mr. Hiner, former chief executive officer and chairman of the manufacturer of building materials and fiberglass. According to the filing, Owens Corning itself would have been named were it not in Chapter 11 bankruptcy protection. Also named were J. Thurston Roach, chief financial officer until April 2000, and his successor, Michael Thaman, who is now company chairman; Deyonne Epperson, comptroller and senior vice president; and Landon Hilliard, a board member who signed a financial disclosure document in March, 2000. The suit alleges the defendants committed securities fraud because they signed documents submitted to the U.S. Securities and Exchange Commission in March and May of 2000 about the company“s financial health, when they knew its financial picture was much worse. The suit contends that keeping that knowledge from investors deprived them of the right to sell, or not buy more shares, hurting them financially when the bankruptcy was filed. Under a proposed plan of reorganization filed by the OC in January 2003, the company“s shares will become worthless when the firm emerges from Chapter 11. If the plan is approved by a bankruptcy judge, executives plan to issue new stock and distribute it to creditors. The lawsuit asks to be certified as a class action, so other OC shareholders could be included in seeking damages. It seeks unspecified compensatory damages, legal fees, and the “awarding of such other and further relief as may be just and proper.” A likely defense argument will be that the permitted time limit for such suits expired two years after the bankruptcy filing, in October 2002. The plaintiff contends, however, that the beginning of the 2 year time frame was later than the October 2000 bankruptcy filing as concrete evidence of the alleged wrongdoing did not appear immediately but only in later motions filed in the bankruptcy case. The case has been assigned to Judge David Katz.