Granite Construction Co. will pay $7.5 million and adopt a series of oversight reforms to end shareholder litigation over claims that its board concealed hundreds of millions in overruns affecting four “mega-projects,” including the Mario Cuomo Bridge across the Hudson River, according to a court filing in Delaware.
The deal, disclosed Thursday, would resolve a derivative lawsuit accusing Granite’s leaders of using accounting tricks to hide nearly $1.4 billion in total overruns—of which the company itself was responsible for $340 million—after recklessly assuming the risk of any overruns or delays as part of its “aggressive” pursuit of the infrastructure jobs.
The agreement, to be funded by Granite’s insurers, includes up to $2.5 million in legal fees for the attorneys who led the case. It comes about a year after Granite settled parallel securities claims for $129 million, of which roughly half was funded by the company and half by its insurers.
The deal doesn’t call for Granite or its board to make any admissions, and they “continue to deny all allegations of wrongdoing, liability, violations of law, or damages,” according to the agreement. The investors, meanwhile, “believe that the claims asserted in the actions have merit, but also believe that the settlement” offers “substantial and immediate benefits,” the filing says.
In addition to the $3.1 billion project to build the Cuomo Bridge—which replaced the former Tappan Zee crossing between New York’s Westchester and Rockland counties—the suit stemmed from a $2.3 billion job building 21 miles of an interstate in Florida, a $1.1 billion contract to build a bridge in Pennsylvania, and a $1.2 billion project renovating 28 highway miles in Texas.
The case centered on claims that Granite’s leaders had the company repurchase stock at prices they knew to be badly inflated as part of a scheme to jack up the value of the company’s shares before its stock-for-stock $565 million deal in 2018 to acquire Layne Christensen Co., which specializes in water management, construction, and drilling.
The suit was filed in May 2021 in Delaware’s Chancery Court.
The investors are represented by Rigrodsky Law PA, Morris Kandinov LLP, and Bragar Eagel & Squire PC.
Granite and its board members are represented by Potter Anderson & Corroon LLP; Munger, Tolles & Olson LLP; O’Melveny & Myers LLP; Dechert LLP; and Wilmer Cutler Pickering Hale & Dorr LLP.
The case is Davydov v. Roberts, Del. Ch., No. 2021-0415, stipulation of compromise and settlement filed 4/14/22.