Service Corporation International, which bills itself as the world's largest funeral and cemetery concern, said yesterday that it will pay $14.8 million to 12 T. Rowe Price mutual funds to settle a lawsuit stemming from a surprise revenue shortfall disclosed in 1999.
A Wall Street darling in the early 1990s, Service Corporation was accused by shareholders in 1999 of hiding its bleak revenue picture and the fact it was experiencing losses on prepaid funeral sales.
The lawsuit also alleged that senior Service Corporation officials, including Robert L. Waltrip, chairman and chief executive, sold more than 2 million shares before the revenue figures were released to the public.
When the Houston company announced Jan. 26, 1999, that its revenue would fall short of expectations, its stock plunged more than 40 percent in a day - to $19.12 from $34.44 - and investors lost millions.
T. Rowe Price Group Inc. decided against joining a class action lawsuit that was settled in April for $65 million.
Instead, T. Rowe Price Balanced Fund and 11 other Price funds sued Service Corporation in a Texas state court in Houston, seeking $32 million in actual damages.
"We do feel that we recovered more for the funds by pursuing litigation independently than by joining in the federal class action litigation," said Brian J. Lewbart, a T. Rowe Price spokesman.
Lewbart said the lawsuit was a rare step for Price.
"Pursuing litigation is something we do fairly infrequently but is something that we will do if we feel that it is justified based on the damages and what we feel are the merits of the case."
Waltrip said in a statement that Service Corporation's decision to settle with Price is in the "best interests of our shareholders."
He said the settlement would enable the company to focus on future opportunities.
Service Corporation operates 1,218 funeral service locations and 402 cemeteries. It also owns and operates funeral service locations, cemeteries and crematoria in seven countries and has a minority equity interest in funeral operations in France, according to a Securities and Exchange Commission filing in September.