CALGARY – Lawyers for investors in failed oilfield services firm Poseidon Concepts Corp. say they have reached an agreement with defendants in a proposed class action lawsuit that will boost the potential payout to as much as $36.6 million.
The global settlement, which does not constitute an admission of liability, will now be presented to Court of Queen’s Bench in Calgary as part of a Companies’ Creditors Arrangement Act plan of arrangement for Poseidon, law firms Siskinds LLP of Toronto and JSS Barristers of Calgary said in an news release.
The agreement includes a $23-million payment split between Poseidon’s former auditor, KPMG; nine financial institutions who underwrote a public offering of Poseidon shares in January 2012; and Peyto Exploration and Development Corp., the Calgary producer that bought its founding firm.
It will also include $11.6 million from Poseidon’s liability insurer and potentially about $2 million from an insurance holdback fund.
“Poseidon’s unfortunate circumstances caused significant financial losses to its investors, and its insolvency added multiple layers of complexity to the litigation,” Robert Hawkes, a partner at JSS Barristers, said in the statement.
“The settlement represents a significant recovery for the benefit of the shareholder class.”
If approved by the Calgary court, Ontario, Quebec and U.S. courts will be asked to recognize its decision and dismiss proposed class action claims there.
The case would then come back to the Calgary court for approval of administrative and legal fees, a call for proofs of claim from investors and establishing a distribution protocol.
Siskinds lawyer Sajjad Nematollahi said there are more than 2,000 investors involved, but a final number, and how much each will receive, won’t be known until the protocol is finalized.
Poseidon was created by Open Range Energy Corp. to develop and market liquid storage systems — resembling gigantic above-ground swimming pools — to be used to handle the enormous amounts of water required for oilfield fracking operations.
The value of the company’s shares soared after it went public, but fell quickly after February 2013 when it announced that it had incorrectly recorded about $100 million in revenue in the first nine months of 2012.
The global settlement replaces a partial settlement with Poseidon’s directors, officers and related entities announced in December.
Last year, the Alberta Securities Commission ordered Poseidon’s former U.S. senior sales executive to pay $750,000 in fines and costs.
In 2016, three of Poseidon’s other executives agreed to pay fines and accept trading bans after admitting to the ASC they had failed to file financial statements in accordance with proper accounting principles.
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