GM accuses bankruptcy trust of secret $1B stock plot
General Motors Co. accused the trust set up to handle its bankruptcy claims of secretly plotting with plaintiffs’ attorneys to make it pay $1 billion in stock as part of a $15 million class-action settlement.
The accord, revealed at a hearing Friday in federal court in New York, will pit GM against the “Old GM” General Unsecured Creditors Trust for the first time since the 2009 bankruptcy sale created the split to save the company.
The settlement between the plaintiffs and the trust for old GM is due to be signed Aug. 15, attorney Steve Berman said in a phone call. The deal will resolve hundreds of personal-injury cases stemming from GM’s faulty ignition switches, as well as a class-action suit over millions of vehicles that allegedly lost value due to a series of recalls in 2014, he said.
Under the accord, which requires a judge’s approval, the trust will pay plaintiffs $15 million and accept $10 billion in previously disputed claims, thus pushing total approved claims in the case beyond a critical threshold of $35 billion, Berman said. That would then trigger a provision of the 2009 sale that would force GM to contribute $1 billion in stock to help pay the claims, he said.
GM, based in Detroit, is balking. The trust is only accepting the $10 billion in claims in order to trigger the provision requiring GM to pay stock, it said. GM has long said the remaining demands are bogus.
“This contrived scheme won’t work,” the company said in a statement. “We will aggressively protect our rights and our shareholders, and will work to hold the GUC Trust and plaintiffs accountable for their bad faith and improper actions.”
Berman said his team has plenty of evidence that the claims are genuine and said GM knew what it was doing when it agreed to the $35 billion claims threshold.
“This is what GM bargained for” as part of the 2009 bankruptcy sale, when it “got away from all these liabilities,” Berman said. “It’s working exactly the way it’s supposed to work.”
The dispute comes weeks after GM won another federal trial over the ignition switches. The devices in the initial recall were linked to more than 100 deaths, with GM paying at least $870 million to settle claims and an additional $900 million to the Department of Justice to resolve a criminal probe.