Nature's Sunshine Products, Inc. - Securities Class Action

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Copyright (c) 2001
Stanford Law School

Nature's Sunshine Products, Inc. Summary: The original complaint charges NSPI and certain of its officers and directors with violations of the Securities Exchange Act of 1934. NSPI engages in the manufacture and marketing of nutritional and personal care products. Specifically, the complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. As a result of defendants’ false statements, NSPI’s stock traded at artificially inflated prices during the Class period, reaching a high of $23.24 per share, allowing its top officers to reap hundreds of thousands of dollars in ill-gotten bonuses and certain of the defendants to sell over $2.9 million worth of their NSPI stock at artificially inflated prices.

The complaint further alleges that on or around February 17, 2006, the Company issued a press release in which it stated that it had expanded its previously announced review of selected financial information with respect to certain of its foreign operations and that it had received notice from Nasdaq that its common stock was subject to delisting. On March 20, 2006, the Company filed an 8-K with the SEC announcing that its previous financial statements could no longer be relied upon and that it had expanded its investigation to include other matters related to the Company’s financial statements. Then on March 24, 2006, the Company announced that it had received a non-compliance notice from the Nasdaq due to its failure to file its Form 10-K in a timely manner. On this news the Company’s stock fell to $11.68 per share.

According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) the Company lacked requisite internal controls, and, as a result, the Company’s projections and reported results issued during the Class Period were based upon defective assumptions and/or manipulated facts; and (b) the Company’s financial statements were materially misstated due to its failure to properly account for foreign transactions.

As summarized by the Company’s FORM 10-Q for the quarterly period ended June 30, 2009, between April 3, 2006 and June 2, 2006, five separate shareholder class-action lawsuits were filed against the Company and certain of its present and former officers and directors in the United States District Court for the District of Utah. These matters were consolidated and on November 3, 2006, the plaintiffs filed a consolidated complaint (the “Consolidated Complaint”) against the Company, the Company’s Chief Executive Officer and a director, the Company’s former Chief Financial Officer, and a former director and former Chair of the Company’s Audit Committee. The Consolidated Complaint asserts three separate claims on behalf of purchasers of the Company’s common stock: (1) a claim against the Company’s Chief Executive Officer and the Company for violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (“the Exchange Act”) and Rule 10b-5 promulgated thereunder, alleging that the Company’s Chief Executive Officer made a series of alleged material misrepresentations to the investing public; (2) a claim against the Company’s Chief Executive Officer and the Company for violation of Section 10(b) and Rule 10b-5, alleging that the Company’s Chief Executive Officer made a series of misrepresentations to the Company’s then independent auditor, KPMG, LLP (“KPMG”), for the purpose of obtaining unqualified or “clean” audit opinions and review opinions from KPMG concerning certain of the Company’s annual and quarterly financial statements; and (3) a claim against the all individual defendants for violation of Section 20(a) of the Exchange Act, alleging that the individual defendants have “control person” liability for the previously-alleged violations by the Company. The Consolidated Complaint seeks an unspecified amount of compensatory damages, together with interest thereon, litigation costs and expenses, including attorneys’ fees and expert fees, and any such other and further relief as may be allowed by law.

On January 5, 2007, the defendants moved to dismiss the Consolidated Complaint in its entirety. On May 21, 2007, the Court issued its decision denying the motion in large part, but shortening the proposed class period on one of the plaintiffs’ claims. On June 6, 2007, the Company and the other defendants answered the Consolidated Complaint, wherein they denied all allegations of wrongdoing and raised a number of affirmative defenses. On November 1, 2007, the plaintiffs filed their motion for class certification, which the Company opposed. On September 25, 2008, the Court granted the plaintiffs’ motion for class certification in part, establishing the class as all persons who purchased or otherwise acquired the Company’s common stock, and were damaged thereby, from March 16, 2005 to March 20, 2006. On May 9, 2008, at the invitation of the Court based upon recent case law developments, the Company filed a motion to dismiss the plaintiffs’ second cause of action (a 10b-5 claim based on non-public representations to KPMG). The plaintiffs opposed this motion. On September 23, 2008, the Court granted the Company’s motion and dismissed the plaintiffs’ second cause of action.

On June 26, 2009, the case was mediated in New York City before a nationally-recognized mediator. All of the parties and the directors’ and officers’ liability insurer for the Company participated in the mediation. The mediation was successful, in that the parties reached an oral agreement in principle at that time as to the settlement of the action. The parties and the Company’s insurer have since succeeded in documenting their agreement in principle in the form of an executed Memorandum of Understanding (“MOU”). The MOU will now serve as a guide to the parties as they negotiate and draft a definitive Stipulation and Agreement of Settlement (the “Stipulation”) setting forth all of the terms and conditions of the settlement, including the form and manner of providing notice to the class and the form of the parties’ proposed order and final judgment. After being advised of this development, the court entered an order setting September 14, 2009 as the deadline for the parties to file a motion seeking preliminary approval of the class action settlement.

On September 14, 2009, a Stipulation of Settlement was filed. According to the Stipulation, the proposed settlement is in the amount of $6,000,000 in cash to be paid by the Company's Insurer. The plaintiffs also filed a motion for preliminary approval of the class action settlement. On October 8, 2009, the motion was granted. The Final Settlement Hearing is set for February 9, 2010.

According to an article dated February 9, 2010, Sunshine Products, Inc. (NASDAQ:NATR) announced that a federal judge in the United States District Court for the District of Utah has issued an Order and Final Judgment approving the settlement of a consolidated class action suit brought against the Company, and various past and present directors and officers, alleging violations of the federal securities laws. Information regarding the proposed settlement terms of the lawsuit, which are now final, can be found in the Company’s Form 10-Q for the quarter ended September 30, 2009, which was filed with the U.S. Securities and Exchange Commission, and which can be accessed via the Company’s website, www.natr.com. The Court’s order dismisses the suit with prejudice. The settlement also includes a release of all claims held by the class members. All payments due under the terms of the settlement have been funded by the Company’s insurer.

INDUSTRY CLASSIFICATION:
SIC Code: 2834
Sector: Healthcare
Industry: Biotechnology & Drugs

COMPANY/ISSUER NAME:	Nature's Sunshine Products, Inc.
COMPANY/ISSUER TICKER:	NATRE
COMPANY WEBSITE:	http://www.naturessunshine.com

FIRST IDENTIFIED COMPLAINT IN THE DATABASE

Amie Hyman, et al. v. Nature's Sunshine Products, Inc., et al.

COURT: D. Utah	DOCKET NUMBER: 06-CV-00267
JUDGE NAME: Hon. Ted Stewart
DATE FILED: 04/03/2006	SOURCE: Notice of Filing
CLASS PERIOD START: 10/19/2004	CLASS PERIOD END: 03/24/2006
TYPE OF COMPLAINT: Complaint (Unamended and Unconsolidated)
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Cohen, Milstein, Hausfeld & Toll, P.L.L.C. (Washington, DC) 1100 New York Avenue, N.W., Suite 500, West Tower, Washington, DC, 20005 (voice) 202.408.4600, (fax) 202.408.4699, lawinfo@cmht.com Federman & Sherwood (Oklahoma City) 120 North Robinson, Suite 2720, Oklahoma City, OK, 73102 (voice) 405-235-1560, (fax) , wfederman@aol.com Howard G. Smith, Attorney at Law 3070 Bristol Pike, Suite 112, Bensalem, PA, 19020 (voice) (215) 638-4847, (fax) (215) 638-4867, Kahn Gauthier Swick, LLC (New Orleans) 650 Poydras St. Suite 2150, New Orleans, LA, 70130 (voice) (504) 455-1400, (fax) , lewis.kahn@kglg.com Law Offices of Charles J. Piven, P.A. World Trade Center-Baltimore,401 East Pratt Suite 2525, Baltimore, MD, 21202 (voice) 410.332.0030, (fax) , pivenlaw@erols.com Lerach Coughlin Stoia Geller Rudman & Robbins LLP (San Diego) 655 West Broadway, Suite 1900, San Diego, CA, 92101 (voice) 619.231.1058, (fax) 619.231.7423, Schatz & Nobel, P.C. 330 Main Street, Hartford, CT, 06106 (voice) 800.797.5499, (fax) 860.493.6290, sn06106@AOL.com Schiffrin & Barroway LLP 3 Bala Plaza E, Bala Cynwyd, PA, 19004 (voice) 610.667.7706, (fax) 610.667.7056, info@sbclasslaw.com Smith & Smith LLP 3070 Bristol Pike, Suite 112, Bensalem, PA, 19020 (voice) 215.638.4847, (fax) 215.638.4867, Spector, Roseman & Kodroff (Philadelphia) 1818 Market Street; Suite 2500, Philadelphia, PA, 19103 (voice) 215.496.0300, (fax) 215.496.6610, classaction@srk-law.com Stull, Stull & Brody (New York) 6 East 45th Street, New York, NY, 10017 (voice) 310.209.2468, (fax) 310.209.2087, SSBNY@aol.com The Rosen Law Firm, P.A. (New York) 350 Fifth Avenue, Suite 5508, New York, NY, 10118 (voice) 212.686.1060, (fax) 212.202.3827, lrosen@rosenlegal.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 12

DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT
Class Action Complaint for Violation of Federal Securities Laws - Demand for Jury Trial
Type: Complaint		Date on the document: 04/03/2006
Memorandum Decision And Order Appointing Lead Plaintiffs, And Approving Lead Plaintiff’s Selection Of Counsel
Type: Order		Date on the document: 08/16/2006

REFERENCE COMPLAINT

In Re: Nature's Sunshine Products, Inc. Securities Litigation

COURT: D. Utah	DOCKET NUMBER: 06-CV-00267
JUDGE NAME: Hon. Ted Stewart
DATE FILED: 11/06/2006	SOURCE: Docket
CLASS PERIOD START: 04/23/2002	CLASS PERIOD END: 04/05/2006
TYPE OF COMPLAINT: Consolidated Complaint
PLAINTIFF FIRMS NAMED IN COMPLAINT:
The Rosen Law Firm, P.A. (New York) 350 Fifth Avenue, Suite 5508, New York, NY, 10118 (voice) 212.686.1060, (fax) 212.202.3827, lrosen@rosenlegal.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 1

DOCUMENTS FOR THE REFERENCE COMPLAINT
Consolidated Class Action Complaint
Type: Complaint		Date on the document: 11/06/2006
Memorandum Decision And Order Denying Motion To Dismiss
Type: Order		Date on the document: 05/21/2007
Memorandum Decision & Order Granting In Part Plaintiff's Motion For Class Certification, Appointment Of Class Representatives, And Appointment Of Class Counsel
Type: Order		Date on the document: 09/25/2008
Stipulation of Settlement
Type: Settlement		Date on the document: 09/14/2009
Preliminary Order Approving Motion For (I) Preliminary Approval Of Stipulation Of Settlement; (II) Preliminary Class Certification; (III) Approval Of Form And Manner Of Notice; And (IV) Scheduling A Final Approval Hearing In Connection With Settlement Preceedings
Type: Order		Date on the document: 10/08/2009
Order And Final Judgment
Type: Order		Date on the document: 02/10/2010
U.S. District Court Civil Docket
Type: Docket		Date on the document: 02/10/2010

OTHER DOCUMENTS
Class Action Complaint for Violation of Federal Securities Laws - Jury Trial Demanded
Case Name and/or Number: [Unknown plaintiff], et al. v. Nature’s Sunshine Products, Inc., et al.
Type: Complaint		Date on the document: 03/31/2006
Class Action Complaint
Case Name and/or Number: Worth Banner, et al. v. Nature’s Sunshine Products, Inc., et al.
Type: Complaint		Date on the document: 04/13/2006

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