Toll Brothers officials to pay $16.2 million settlement
NEW YORK (Reuters) - Officials at luxury-home builder Toll Brothers Inc. (TOL.N) have agreed to pay $16.2 million to settle claims that they misled shareholders about the company's future prospects while reaping $615 million from sales of the company's stock.
The settlement was filed Thursday in Delaware Chancery Court. If approved, it would resolve claims that several Toll Brothers directors -- including co-founders Robert and Bruce Toll -- went to great lengths to convince investors that the company was uniquely positioned to weather a downturn in the housing market, according to a 2008 lawsuit filed by Toll Brother shareholder Milton Pfeiffer.
The complaint accused the defendants of profiting from their rosy predictions, earning proceeds of more than $615 million from selling off millions of company shares between late 2004 and 2005. Even as concerns were raised about a potential housing bubble, the defendants went to great lengths to convince investors otherwise, it said.
From late 2004 until late 2005, Toll Brothers executives stuck by projections of 20 percent net income growth in 2006 and 2007, the complaint said.
But in December 2005, management abruptly lowered its annual growth projections for 2006 to just 0.5 percent, which received a negative reaction from analysts and shareholders, according to the complaint.
As part of the settlement, the defendants denied they traded on any non-public insider information about the company, breached their fiduciary duties or made misleading statements about the company. Representatives for Toll Brothers could not be immediately reached for comment Thursday evening.
Toll Brothers' insurers will pay $9.8 million of the settlement amount, while the executive defendants will pay the remaining $6.45 million, according to settlement papers.
The settlement would resolve the 2008 Delaware lawsuit, as well as two other investor lawsuits filed in a Pennsylvania federal court, settlement papers showed.
Lawyers for the plaintiffs said in the filing that the settlement "is in the best interest of the parties and Toll Brothers' current stockholders."
The case is Pfeiffer v. Toll et al., in the Delaware Chancery Court, no. 4140-VCL.
(Reporting by Jessica Dye; Editing by Richard Pullin)