Quantum Corporation Conclusion: According to the Company’s Form 10-Q for the quarterly period ended June 27, 1999, following a hearing on plaintiff's appeal of the District Court's dismissal with prejudice of plaintiff's amended complaint in the federal class action on May 13, 1999, and prior to a ruling on the appeal, the plaintiff agreed to dismiss with prejudice the state and federal class action lawsuits. Pursuant to a letter agreement dated May 21, 1999, plaintiff agreed to dismiss the lawsuits with no financial contribution from the defendants. A stipulation of dismissal with prejudice was filed in federal court on June 10, 1999, and in state court on June 17, 1999. Each side agreed to bear its own costs and fees.
As reported by the Company’s FORM 10-K for the fiscal year ended March 31, 1999, with respect to the federal action, defendants filed their motion to dismiss on April 16, 1997. On August 14, 1997, the Court granted defendants' motion to dismiss without prejudice. On September 11, 1997, plaintiff filed an amended complaint. Defendants filed a motion to dismiss the amended complaint on October 24, 1997. The hearing on defendants' motion took place on February 3, 1998. On April 16, 1998, the Court granted defendants' motion to dismiss with prejudice. On May 19, 1998, plaintiff filed a notice of appeal of the District Court's dismissal in the United States Court of Appeals for the Ninth Circuit. On September 25, 1998, plaintiff filed his opening appellate brief. Defendants filed their answering brief on November 30, 1998. Plaintiff's reply brief was filed on January 14, 1999.
The Company and certain of its current and former officers and directors have been named as defendants in two class action lawsuits, one filed on August 28, 1996, in the Superior Court of Santa Clara County, California, and one filed on August 30, 1996, in the U.S. District Court of the Northern District of California. The plaintiff in both class actions purports to represent a class of all persons who purchased the Company's common stock between February 26, 1996, and June 13, 1996. The complaints allege that the defendants violated various federal securities laws and California statutes by concealing and/or misrepresenting material dverse information about the Company and that individual defendants sold shares of the Company's stock based upon material nonpublic information.
The original complaint charges Quantum, which manufactures and sells disk drives and related data storage equipment, and certain of its officers and directors with violations of the California Corporations, Civil and Business & Professions Codes. During the Class Period, defendants artificially inflated Quantum stock to as high as $26-1/8 per share based on representations that Quantum's Desktop and Portable Storage Group had successfully introduced a new line of 5.25 inch "Bigfoot" disk drives which were enjoying an outstanding response from customers and generating strong demand which would contribute to Quantum achieving substantial revenue and earnings gains throughout Fiscal 1997, to end March 31, 1997. However, just a few months later, Quantum revealed that demand for its "Bigfoot" drives was, in fact, soft and sales of that product line were well below expectations, leading to excess inventory and price cutting which would adversely impact Quantum's Fiscal 1997 results. Quantum's stock immediately collapsed to $15-3/8 per share and continued to fall to as low as $10-7/8, as the market digested this bad news. However, before the truth about the failure of Quantum's "Bigfoot" product line came out and Quantum's stock collapsed, seven Quantum insiders had sold over 265,543 shares of their Quantum stock at artificially inflated prices as high as $25-5/8 per share, pocketing over $6.5 million in illegal insider trading proceeds. Several of Quantum's insiders, including Quantum's CEO and the heads of Quantum's Desktop and Portable Storage Operations and its Tape Storage Operations, sold 99%-100% of their Quantum stock.
SIC Code: 3572
Industry: Computer Storage Devices
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