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Last-minute CEO switch after merger costs company $146 million

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Duke Energy Corp. has agreed to pay $146.3 million to settle securities class action litigation over the issue of the last-minute switch of the company's top executive following a merger.

The settlement by the Charlotte, North Carolina-based firm is the latest large settlement of a merger-related lawsuit.

According to court papers in Maurine Nieman et al. v. Duke Energy Corp. et al., after Duke had agreed to merge with Raleigh, North Carolina-based Progress Energy Corp., it had repeatedly announced that the merged company's CEO would be Progress CEO William D. Johnson.

Mr. Johnson's appointment “was one of the primary reasons” the deal was even considered, according to the complaint in the case. It said Duke President and CEO James E. Rogers was not an attractive choice because of his involvement in an ethics scandal.

However, less than two hours after the merger became effective in July 2012, the company announced that Mr. Rogers would head the new company. Mr. Johnson was asked to resign.

Shareholders filed suit late the same month against the company, its executives and directors, charging the defendants with making false and misleading statements and material omissions, among other charges.

Duke said in its statement Tuesday that most of the settlement, which is subject to approval by the U.S. District Court in Charlotte, would be covered by insurance, and that company shareholders would pay the remaining portion. The company had previously recorded a $28 million reserve for the estimated portion not covered by insurance.

Mr. Rogers' retirement, scheduled for the end of 2013, was announced in November 2012, following a settlement with the North Carolina Utilities Commission, which had been reviewing the situation involving Duke's leadership.

A Duke Energy spokesman said the company had no further comment.

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