Rent-Way Reaches $25M Deal in Accounting Suit

Rent-Way Inc. said Thursday it has agreed to pay $25 million to shareholders who accused the national rental chain of manipulating its books and inflating earnings. The proposed settlement is still subject to court approval, as well as refinancing of Rent-Way's debt by July 31. But company executives at the Erie, Pa.-based furniture, appliance and computer rental chain expressed hope the issue had been resolved.

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Rent-Way Inc. said Thursday it has agreed to pay $25 million to shareholders who accused the national rental chain of manipulating its books and inflating earnings. The proposed settlement is still subject to court approval, as well as refinancing of Rent-Way’s debt by July 31. But company executives expressed hope the issue had been resolved. “This settlement is an important step forward for Rent-Way,” CEO William Morgenstern said in a statement. “We are now better positioned to refinance our outstanding bank debt on more favorable terms.” Rent-Way plans to pay $21 million of the proposed settlement in cash and said it will take out a loan for the rest. Solomon Cera, attorney for lead plaintiff Cramer Rosenthal McGlynn, a New York financial services firm, said he believed $25 million was a reasonable amount considering Rent-Way’s heavy debt load. His client said it bought more than 433,000 shares of Rent-Way based on false information and lost $10.1 million in investments. Two years ago, shareholders filed a federal lawsuit against Rent-Way, an Erie, Pa.-based furniture, appliance and computer rental chain, and its accounting firm, PriceWaterhouseCoopers, alleging that officers used faulty accounting practices to drive the stock price up. Morgenstern and other defendants maintained their innocence, saying a handful of executives working independently were responsible for the company’s accounting problems. The company revealed in October 2000 that improper entries had been made into its accounting ledger to the tune of $75 million. That figure was later determined to be $98 million over a little more than two years. The news sent the company’s stock tumbling from around $25 per share to $5 per share, losing 80 percent of its value in one day. Rent-Way delayed its 2000 annual report by eight months and trimmed its books by $129 million. Matthew Marini, the company’s controller and chief accounting officer, was fired and Jeffrey Conway, the company’s former president and chief operating officer, was asked to resign. Since the suit, Rent-Way has sold nearly 300 stores to the nation’s largest rental chain, Rent-A-Center Inc. Rent-Way now has 759 stores in 33 states. Rent-Way stock closed up 30 cents at $3.90 Thursday on the New York Stock Exchange. Copyright 2003 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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