MBIA Inc. settled a class-action, or group, lawsuit over investors’ claims that it materially misstated financial results by engaging in improper accounting practices, both sides informed a federal court.

The accord, for $3.75 million, will be distributed to investors who purchased or otherwise acquired MBIA common stock from Aug. 5, 2003, through March 30, 2005, the parties said in court papers.

A federal appeals court in February 2011 reinstated the case after U.S. District Judge Louis Stanton in Manhattan dismissed it four years earlier, saying the plaintiffs waited too long to file their case. Stanton said the statute of limitations had expired because the investors had notice of alleged wrongdoing in 2002. The appeals court said the trial judge improperly calculated the statute of limitations.

The investors sued MBIA in 2005, alleging in Manhattan federal court that flawed accounting enabled Armonk, New York- based MBIA to overstate reported income from 1998 to 2003.

Lawyers for both sides filed a proposed settlement with Stanton late yesterday. The plaintiffs are led by the Southwest Carpenters Pension Trust and the City of Pontiac General Employees’ Retirement System.

Mediated Accord

“In an effort to resolve the action through good-faith settlement negotiations, the parties attended a mediation,” they said in court papers. “Following extensive discussions and negotiations led by the mediator, the parties reached an oral agreement on the principal terms of the settlement.”

MBIA, the bond insurer fighting lawsuits challenging its 2009 split, said it denied and continues to deny any allegations of wrongdoing

Sam Rudman, a lawyer for the plaintiffs, didn’t immediately reply to a voice-mail message seeking comment about the accord. Steve Klugman, a lawyer for MBIA, declined to comment. Kevin Brown, an MBIA spokesman, declined to comment on the settlement in an e-mail.

The case is In re MBIA Inc. Securities Litigation, 05-cv- 3514, U.S. District Court, Southern District of New York (Manhattan).

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