Investors in Marrone Bio Innovations Inc. told a California federal judge on January that they have settled the last remaining claim in their suit over the biopesticide maker’s alleged financial misrepresentations, saying they’ve reached a $775,000 deal with Marrone auditor Ernst & Young LLP.
It has been nearly four and a half years since investors filed suit against Marrone for allegedly lying about its financial health after its shares began trading publicly. The investors reached a $12 million settlement with the company in September 2016, but have continued their pursuit to hold Ernst & Young liable for its certification of Marrone’s financial reports.
Settlement talks were disclosed to the court as early as May 2017 but initially fell through, according to Thursday’s preliminary settlement approval motion, and Ernst & Young subsequently asked the court to reconsider its denial of a motion to dismiss the case. After that motion was rejected in last June, the parties entered mediation and ultimately reached an agreement in principle. “Lead plaintiffs and lead counsel — based upon their experience, evaluation of the facts and applicable law, their recognition of the amount of the settlement, and the risk and expense of continued litigation — submit that the proposed settlement is fair, reasonable, and adequate,” the investors said.
Investors first alleged in September 2014 that Marrone, a Davis, California-based sustainable pest-management company, lied about its finances since it began trading publicly in August 2013, according to court records. The U.S. Securities and Exchange Commission and the U.S. Department of Justice subsequently launched actions against the company and former Chief Operating Officer Hector M. Absi Jr., respectively, surrounding hidden sales concessions offered to customers from the company’s finance workers and independent auditors, allowing the company to recognise revenues on the sales and leaving Absi to profit from the fraud.
Absi resigned in August 2014, just before the company told investors it was restating its financials from the year before and Marrone’s stock plunged 44 percent, the SEC said. Marrone has since paid a $1.75 million penalty to settle the SEC’s charges against the company and Absi is awaiting a criminal trial.
Source: Law360, London