* 2008 suit alleged misleading statements over lending,
* CIT filed Chapter 11 bankruptcy in November 2009, emerged
By Basil Katz
NEW YORK, March 13 CIT Group Inc (CIT.N)
on Tuesday asked a federal judge to approve a $75 million
settlement proposal with former CIT shareholders in a
class-action securities fraud lawsuit over actions preceding the
large commercial lender's 2009 bankruptcy.
The preliminary settlement, which was submitted for
Manhattan federal court Judge Barbara Jones' approval, would put
an end to a lawsuit brought on behalf of purchasers of CIT
securities from Dec. 12, 2006 to March 5, 2008.
CIT once lent to 1 million small- and mid-sized businesses,
but filed one of the five largest bankruptcies in U.S. history
on Nov. 1, 2009, after loan losses surged. The New York-based
company emerged in 2010 after a prepackaged reorganization.
CIT and the plaintiffs called the settlement a "very good
result" and urged the judge to grant her initial approval of the
proposed deal. The deal calls for CIT to pay $75 million in cash
to be distributed among class members.
"Given the complexities and the continued risk the parties
would face if the litigation were to proceed, the settlement
represents a reasonable resolution to the parties' disputes and
eliminates the risk that the settlement class might recover
nothing, or a vastly smaller amount, following trial and
inevitable appeals," the proposed agreement said.
In refusing to dismiss the case two years ago, Jones said
the investors had sufficiently alleged they were misled by CIT
officials. The plaintiffs had accused CIT of failing to disclose
a lowering of credit standards, misrepresenting the performance
of subprime mortgage and student loan portfolios.
The plaintiffs, the judge said, had also adequately shown
CIT directors sometimes approved the lowered lending standards
while touting a "conservative" and "disciplined" approach to
subprime lending, and learned of the weakened loan portfolios
while publicly saying CIT would suffer "minimal" losses.
CIT's bankruptcy filing caused the government to lose the
$2.3 billion in bailout money it had injected into CIT in
The lead plaintiff in the case is Pensioenfonds Horeca &
Catering, a pension fund for the Dutch hospitality and catering
industry. Former CIT Chief Executive Jeffrey Peek is named as a
defendant in the lawsuit.
Peek was replaced by John Thain, who previously held the
same role at Merrill Lynch & Co and NYSE Euronext
The case is In re: CIT Group Inc Securities Litigation, U.S.
District Court, Southern District of New York, No. 08-06613