Litigation is ongoing in several consolidated class actions filed against scrap iron company Philip Services Corporation (Pink Sheets:PPSVF.PK), certain of its officers and directors, and affiliated accounting firms by stockholders who purchased the company's common stock between February 28, 1996, and May 7, 1998. The actions claim that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.

Siding with plaintiffs in a recent opinion, the judge has rebuffed motions by directors and outside auditors to dismiss securities fraud claims against them-- ruling against two Philip directors and the company's outside auditor, Deloitte & Touche, LLP, who tried to have the allegations against them tossed out.

The Canadian metal processing company was forced to restate its financial statements for three years in the mid-1990s, admitting, among other details, that its 1995 earnings had been overstated by a whopping 690%. As a result of its disclosures, the price of Philip stock dropped 80% between January and July 1998, resulting in significant shareholder losses. Not long afterward, Philip filed for bankruptcy protection. The company emerged from Chapter 11 proceedings in January 2004. Deloitte is accused of facilitating the accounting fraud.

This most recent decision is the latest in a case that has seen years of ups and downs for the plaintiffs, with motions to dismiss and subsequent appeals dating back to 1998. The decision finally allows the case to proceed against Deloitte and Philip directors William Haynes and Robert Knauss. The judge found that the complaint "sufficiently alleges Deloitte’s fraudulent intent" and "sufficiently alleges facts creating a strong inference that Haynes and Knauss knowingly committed securities fraud." Both men were directors of Allwaste, which was acquired by Philip in July 1997, and were appointed Philip directors on August 6, 1997. Their liability therefore begins only as of August 7, 1997.