Hanover Compressor Company (NYSE:EXH)

(now Exterran Holdings, Inc.)

Shareholders of Hanover Compressor Company, a provider of natural gas compression services operating in the United States and select international markets now known as Exterran Holdings Inc., brought claims on behalf of the company against company officers and directors for breach of fiduciary duty, waste of corporate assets, abuse of control, and gross mismanagement.  The claims arose 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.  They claimed 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.

Robbins Arroyo LLP attorneys, serving as lead negotiators for derivative plaintiffs, secured extraordinary results for Hanover.  First, Robbins Arroyo LLP achieved for the company approximately $57.4 million in compensation – consisting of a $26.5 million payment and the return of 2.5 million shares valued at approximately $30.9 million by an entity controlled by certain of the individual defendants.  Second, Robbins Arroyo LLP helped secure corporate governance changes at the company that have been noted as “groundbreaking” and “unprecedented” benefits for Hanover, including the appointment of two shareholder-nominated directors and becoming one of the first companies in the United States to commit to implementing a five-year rotation rule for its outside audit firms.

Pirelli Armstrong Tire Corp. Ret. Med. Benefits Trust v. Hanover Compressor Co., No. H-02-0410 (S.D. Tex. Feb. 6, 2004).

 

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