PNC Bank 2005 Annual Report Download - page 81

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companies and numerous other companies and individuals
have been named as defendants in one or more of the
lawsuits. Collectively, with respect to some or all of the
defendants, the lawsuits allege federal law claims, including
violations of federal securities and other federal laws,
violations of common law duties, aiding and abetting such
violations, voidable preference payments, and fraudulent
transfers, among other matters. The lawsuits seek
unquantified monetary damages, interest, attorneys’ fees and
other expenses, and a return of the alleged voidable
preference and fraudulent transfer payments, among other
remedies. We believe that we have defenses to the claims
against us in these lawsuits, as well as potential claims
against third parties, and intend to defend these lawsuits
vigorously. These lawsuits involve complex issues of law and
fact, presenting complicated relationships among the many
financial and other participants in the events giving rise to
these lawsuits, and have not progressed to the point where we
can predict the outcome of these lawsuits. It is not possible
to determine what the likely aggregate recoveries on the part
of the plaintiffs in these matters might be or the portion of
any such recoveries for which we would ultimately be
responsible, but the final consequences to PNC could be
material.
On April 29, 2005, an amended complaint was filed in the
putative class action against PNC; PNC Bank, N.A.; our
Pension Plan and its Pension Committee in the United States
District Court for the Eastern District of Pennsylvania
(originally filed in December 2004). The complaint claims
violations of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), arising out of the January 1,
1999 conversion of our Pension Plan from a traditional
defined benefit formula into a “cash balance” formula, the
design and continued operation of the Plan, and other related
matters. Plaintiffs seek to represent a class of all current and
former employee-participants in and beneficiaries of the Plan
as of December 31, 1998 and thereafter. Plaintiffs also seek
to represent a subclass of all current and former employee-
participants in and beneficiaries of the Plan as of December
31, 1998 and thereafter who were or would have become
eligible for an early retirement subsidy under the former Plan
at some time prior to the date of the amended complaint. The
plaintiffs are seeking unquantified damages and equitable
relief available under ERISA, including interest, costs, and
attorneys’ fees. On November 21 2005, the court granted our
motion to dismiss the amended complaint. Plaintiffs have
appealed this ruling to the United States Court of Appeals for
the Third Circuit. We believe that we have substantial
defenses to the claims against us in this lawsuit and intend to
defend it vigorously.
In its Form 10-Q for the quarter ended March 31, 2005,
Riggs disclosed a number of pending lawsuits. All material
lawsuits have been finally resolved or settlement agreements
have been reached, in some cases subject to final
documentation or court approval. None of the pending
settlement amounts where the settlement has not been
completed is material to PNC. The pending settlement
amount for each of these lawsuits has been reserved upon the
recording of our acquisition of Riggs.
As a result of the acquisition of Riggs, PNC is now responsible
for Riggs’ obligations to provide indemnification to its
directors, officers, and, in some cases, employees and agents
against certain liabilities incurred as a result of their service on
behalf of or at the request of Riggs. PNC is also now
responsible for Riggs’ obligations to advance on behalf of
covered individuals costs incurred in connection with certain
claims or proceedings, subject to written undertakings to repay
all amounts so advanced if it is ultimately determined that the
individual is not entitled to indemnification. Since the
acquisition, we have advanced such costs on behalf of covered
individuals from Riggs and expect to continue to do so in the
future at least with respect to lawsuits and other legal matters
identified in Riggs’ first quarter 2005 Form 10-Q.
There are several pending judicial or administrative
proceedings or other matters arising out of the three 2001
PAGIC transactions. These pending proceedings or other
matters are described below. Among the requirements of a
June 2003 Deferred Prosecution Agreement that one of our
subsidiaries entered into relating to the PAGIC transactions
was the establishment of a Restitution Fund through our $90
million contribution. The Restitution Fund will be available to
satisfy claims, including for the settlement of the pending
securities litigation referred to below. Louis W. Fryman,
chairman of Fox Rothschild LLP in Philadelphia,
Pennsylvania, is administering the Restitution Fund.
In December 2004 and January and March 2005, we entered
into settlement agreements relating to certain of the lawsuits
and other claims arising out of the PAGIC transactions. These
settlements are described below, following a description of
each of these pending proceedings and other matters.
The several putative class action complaints filed during 2002
in the United States District Court for the Western District of
Pennsylvania arising out of the PAGIC transactions were
consolidated in a consolidated class action complaint brought
on behalf of purchasers of our common stock between July 19,
2001 and July 18, 2002 (the “Class Period”). The consolidated
class action complaint names PNC, our Chairman and Chief
Executive Officer, our former Chief Financial Officer, our
Controller, and our independent auditors for 2001 as
defendants and seeks unquantified damages, interest,
attorneys’ fees and other expenses. The consolidated class
action complaint alleges violations of federal securities laws
related to disclosures regarding the PAGIC transactions and
related matters.
In August 2002, the United States Department of Labor began
a formal investigation of the Administrative Committee of our
Incentive Savings Plan (“Plan”) in connection with the
Administrative Committee’ s conduct relating to our common
stock held by the Plan. Both the Administrative Committee
and PNC have cooperated fully with the investigation. In June
2003, the Administrative Committee retained Independent
Fiduciary Services, Inc. (“IFS”) to serve as an independent