Hanover Compressor Company (NYSE:EXH)
(now Exterran Holdings, Inc.)
In the Hanover shareholder derivative litigation, shareholders of Hanover Compressor Company, a provider of outsourced natural gas compression services operating in the United States and select international markets, brought claims on behalf of the Company for breach of fiduciary duty, waste of corporate assets, abuse of control, and gross mismanagement against Hanover insiders arising out of an off-balance-sheet joint venture to build and operate a natural gas processing plant on barges off the coast of Nigeria.
Plaintiffs alleged that the company's officers and directors personally profited by selling their shares in Hanover at prices they knew were artificially inflated by their accounting manipulations. The shareholders alleged that the insiders caused Hanover to book revenues based on the percentage of construction work completed, despite the fact that the company would not see any revenues until all of the construction work was completed. After nine months of protracted, arm's length negotiations, Robbins Umeda LLP achieved a groundbreaking and unprecedented settlement on behalf of the derivative plaintiffs and the company that secured a $26.5 million payment to the company, the return of 2.5 million shares by an entity controlled by defendants, and the appointment of two shareholder-nominated directors. Under the terms of the settlement, Hanover became one of the first companies in the U.S. to commit to implement a five-year rotation rule for its outside audit firms.
Harbor Finance Partners v. McGhan, No. H-02-0761 (S.D. Tex. June 15, 2007).
