Cannon Group announced Tuesday that the company and its insurers have tentatively agreed to pay $33 million to settle several pending class-action shareholder suits, which alleged that the independent film producer inflated its stock price with false financial reports to the public.
The figure was much larger than one reported April 1, when the company said it had reached a $20-million partial settlement.
Cannon also disclosed Tuesday that it managed by the end of its first quarter in early April to maintain the minimum net worth required by terms of its outstanding bonds. On May 31, the firm forecast a first-quarter loss and said it did not expect its net worth to be above $37.5 million, the minimum needed to avoid a penalty.
The company said Tuesday that it expects to report the first-quarter results "by early next week."
Last April, control of the troubled Los Angeles company was shifted to its European stockholders led by Giancarlo Parretti, who was named chief executive. Menahem Golan and Yoram Globus, formerly the top executives and controlling shareholders, were put in charge of Cannon's movie-making subsidiary.
Procedures May Change
Cannon said it would be required to pay $9 million of the legal settlement, with the rest paid by insurance carriers for its directors and officers and for its former outside auditors, Mann Judd Landau, who also were defendants.
The earlier $20-million estimate did not include a settlement of claims against the auditors.
A stockholder suit pending in Delaware against the company and its officers and directors also is included in the agreements in principle.
The "final definitive settlement agreement" may require the company to change its "procedures and systems of internal accounting controls and record-keeping," Cannon said.
The tentative agreements "will not constitute any admission of any liability or wrongdoing," the company said, adding that its board found it in the best interests of Cannon and its shareholders and bondholders to settle the suits at this time.
The suits were filed after Cannon disclosed in August, 1986, that the Securities and Exchange Commission was conducting an informal inquiry into the way the firm was accounting for its film costs.
Later, the SEC expanded the inquiry into a broad formal investigation, and, last Nov. 9, filed a securities fraud complaint. The company settled the case without admitting or denying the allegations in the suit. Among other things, Cannon agreed to have its auditors make a special review of its accounting controls for each of the next three years.