PITTSBURGH — An investor has filed a class action lawsuit against United States Steel Corp., alleging it defrauded and misled stockholders and employees.
Roy Cetlin, individually as assignee of Maud Cetlin and Cassandra Cetlin as successor-in-interest to Ceroy Inc., on behalf of 2230439 Ontario Ltd. and on behalf of all others similarly situated, filed a complaint on April 24 in the United States District Court for the Western District of Pennsylvania against United States Steel Corp., Mario Longhi, David B. Burritt, and Dan Lesnak, alleging violation of the Federal Securities Law, false and misleading statements, and fraud.
The defendant by 2014 claims he had experienced years of losses, resulting in a total 90% drop in their stock price and bankruptcy of its Canadian subsidiary. The defendant, Longhi, hired McKinsey to launch a “transformational process” that was supposed to improve the company’s operations, supply chain, procurement, manufacturing and more, the suit says.
The U.S. steel market began to deteriorate over the course of 2015 and the defendant was forced to the brink of bankruptcy with a $1.5 billion end-of-year loss for 2015 and failure to turn a profit in six years, the suit says.
As the defendant struggled financially, it abandoned its initiatives on employee engagement and reliability-centered maintenance and began to focus only on cost-cutting to salvage the bottom line, the suit says. The defendant began to lay off thousands of employees, which allegedly left the company with too few individuals to run the facilities safely.
The United Steelworkers Union had filed a grievance in August 2016 about the layoffs and demotions and subsequent safety concerns. Investigators faulted the defendant for failing to de-energize live parts before an employee worked on them, failing to properly train employees and other discrepancies, the suit says.
The defendant, however, is accused of continuing to cut corners, instructing plan managers to do the "bare minimum to get by" and try to fix broken machinery without the proper repairs. The defendant, though aware that it was deferring important maintenance and repairs, allegedly continued to do so but claimed that it was operating as it ought to be. In 2016, the defendant launched a secondary stock offering even though it was planning on decreasing production, which would result in the company losing significant market share, the suit says.
The plaintiff is seeking trial by jury, interest, attorney and expert fees, cost of court and relief deemed fit.
The plaintiff is represented by Pittsburgh attorney Vincent Coppola and Shannon Hopkins, Nancy Kulesa, Stephanie Bartone and Gregory Potrepka of Levi & Korsinsky.
United States District Court for the Western District of Pennsylvania case number 2:19-CV-00469