PriceWaterhouse to Pay $30.5 Million to Settle SmarTalk Teleservices Litigation
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NEW YORK (Map) - NEW YORK, Feb. 14 /PRNewswire/ -- Goldin Associates, LLC announced today that it has settled a lawsuit brought on behalf of SmarTalk Teleservices against the accounting firm PriceWaterhouseCoopers for its role in the failure of the once promising telecommunications company. Goldin, a financial restructuring and turnaround advisory firm, was appointed by the U.S. Bankruptcy Court in 2001 to oversee the liquidation of the failed company.
In the late 1990s, SmarTalk was a rapidly growing publicly-traded company engaged in the prepaid long-distance telephone calling-card business. The company pursued a strategy of "rolling up" other prepaid calling-card companies and ultimately became the market leader.
In August of 1998, SmarTalk announced that it would have to delay release of its second quarter earnings and restate its financial results for the prior year. In the aftermath of the announcement, the market value of SmarTalk stock plunged and the company lost access to the capital markets and the financial resources necessary to fund its business. The company ran out of money and filed for bankruptcy in Delaware early the following year. SmartTalk's assets were ultimately sold in bankruptcy to AT&T, which merged the business into its own prepaid calling-card business.
PriceWaterhouseCoopers was auditor to SmarTalk and also provided accounting advice in connection with SmarTalk's acquisitions and the preparation of its financial statements. Creditors of SmarTalk sued the accounting firm on behalf of the company for malpractice relating to its accounting advice, its audit services and the handling of the financial restatement, among other matters. The lawsuit has been pursued since 2001 by Goldin as trustee for the Worldwide Direct Liquidation Trust, the successor to SmarTalk. The lawsuit is pending in the United States District Court for the Northern District of Texas, Dallas Division.
The settlement resolves the last of the various lawsuits brought in the aftermath of SmarTalk's failure. Under the terms of the settlement, PriceWaterhouseCoopers will pay the trustee $30.5 million. The funds will be distributed to former creditors of SmarTalk holding allowed claims approved by the Bankruptcy Court. The accounting firm will also release more than $1 million of claims it filed against the company. The settlement is subject to the approval of the Bankruptcy Court overseeing SmarTalk's liquidation.
The settlement will enable Goldin, as trustee, to wind up the affairs of the Trust and make final distributions to SmarTalk's former creditors. Creditors of SmarTalk have thus far received payment of 44.5% on $232.4 million of allowed general unsecured claims.
Goldin was represented in the SmarTalk litigation by the law firms Jones Day and Munsch Hardt Kopf and Harr.
