US - PricewaterhouseCoopers (PwC) is to pay $225m (€165m) in a class action settlement on allegations of accounting fraud at Tyco International.
Until 2003, PwC was the auditor at US electronics company Tyco and was alleged to have failed in its duties as a corporate watchdog because between 1999 and 2002, Tyco company allegedly overstated its income by $5.8bn.
"PwC has decided to resolve the vast majority of the Tyco litigation involving the firm by joining the global settlement previously announced by Tyco International, Inc. on May 15, 2007," PwC spokesman David Nestor confirmed.
Tyco had agreed to pay shareholders almost $3bn to settle the claims - the "single largest payment from any corporate defendant in the history of securities class action litigation", commented US-law firm Schiffrin Barroway Topaz & Kessler (SBTK) LLP, one of the firms representing the investors.
Similarly, PwC's offer, which still has to be approved by the court, is "one of the largest payouts ever made by an auditor," a SBTK spokesman pointed out to IPE.
"It is a sign that there is accountability not only the companies that commit this kind of fraud but also people who either turn a blind eye or actually help them with it," he added.
And: "While we try and do a lot with corporate governance there sometimes needs to be a financial aspect to it to keep this from happening in the future."
Caroline Goodman, managing director at Institutional Protection Services (IPS), stresses the relevance of securities class actions like these for European institutions.
"We have seen a number of mega settlements in the past few years and this has raised awareness about these processes and that European institutions do have a part in them," Goodman told IPE.
"More than ever, European institutions need to be looking at security class actions in the US and wherever else they might come around," she said and added that currently France and Germany are looking at ways to set up regulations for court procedures "along that route".
The biggest obstacles at the moment are obtaining information and understanding the procedure, Goodman explains.
"The procedures are very difficult and administratively intense. Rough estimates are that only 20-30%of claims from Europe get through so even if you have the right information and have identified what you might be due from that settlement there are quite a number of difficulties to actually get your money back."
She added as European institutions become international investors they need to make themselves familiar with procedures in other countries.
"In the US corporate governance changes through securities class action settlements. They are in fact seen as a second level of regulations." Goodman noted in the US there are about 200 securities class actions every year.