pokies giant pays out 144m in class action

Pokies giant pays out $144m in class actionBy Vincent Morello
August 28, 2008 03:59pm
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THE largest class action settlement in Australia has cost Aristocrat Leisure more than $144 million in a payout to thousands of shareholders.

The Federal Court in Sydney today approved the agreement between the gaming giant and Dorajay, which represented about 4000 share holdings by retail and institutional investors.

Aristrocrat had misstated earnings on two occasions and issued a subsequent profit forecast that was unattainable, resulting in a share price plunge and big losses for its shareholders when the true state of the company was revealed.

Maurice Blackburn lawyers, who acted for Dorajay, said the payout represented an 80 cent return for every dollar shareholders lost before interest - the highest on record.

Investors who acquired shares between February 19, 2002 and May 26, 2003 claimed they suffered losses from the company's foray into South American markets during that time.

Court action concluded in October and the two parties have since been negotiating the settlement, which was presented today before Justice Margaret Stone.

Dorajay's barrister Michael Lee said the court would agree with the payout.

"Given the size of the settlement, it plainly falls within the range of settlements that your honour would find fair and reasonable," Mr Lee told the court.

Aristocrat's barrister Matthew Darke said: "My client of course supports the application."
Later in the proceedings, Justice Stone expressed her approval.

"I think it makes sense and I can't see any loose ends," she said.

Outside court, Maurice Blackman chairman Bernard Murphy said Aristocrat engaged in "a serious episode of misconduct" when it misstated profits in 2001 and 2002 and later issued an unreasonable profit forecast.

"When the true state of the company was revealed to the market its share price collapsed and $2 billion came off its market capitalisation," Mr Murphy said.

He said the share price at the time plummeted from just above $5 to less than $1.

"It was involved in businesses in South America that weren't travelling the way they hoped, and instead of revealing the true state of its business to the market it chose to fudge."

He estimated the 80 per cent return to shareholders represented the highest in any class action.

The law firm earlier this year estimated a total damages bill of up to $396 million.

Aristocrat had estimated the damages at between $10 million and $20 million.

The shareholders' action was funded by litigation funder IMF Australia.

It has estimated it will receive $37 million from the settlement, which represents a profit of $22 million from its funding investment.

Maurice Blackburn lawyer Lachlan Armstrong told the court investors would receive their payouts sometime in the next two to three months.

The settlement was made up of $136 million damages and $8.5 million costs.