Witness Systems, Inc. - Securities Class Action

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Witness Systems, Inc. Summary: According to a January 9, 2009 opinion, the Eleventh Circuit Court of Appeals affirmed the District Court's dismissal of the action.

On January 25, 2007, the Court granted an unopposed motion by “Witness Systems Investor Group” for an order consolidating all later-filed securities class actions, appointing the Group as Lead Plaintiff, and approving its selection of Motley Rice LLC and Kahn Gauthier Swick LLC as Co-Lead Counsel. A Consolidated Amended Complaint was filed on April 6, 2007, adding a claim under Section 20(a) of the Exchange Act and naming the Company’s auditor, KPMG LLP, as an additional defendant. In response, the defendants filed motions to dismiss the Consolidated Amended Complaint. On March 31, 2008, Judge Clarence Cooper of the United States District Court for the Northern District of Georgia granted the defendants’ motions to dismiss with prejudice. On April 29, 2008, the lead plaintiff group filed a Notice of Appeal as to the dismissal of the complaint.

The original complaint alleges that the Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder by failing to disclose to the investing public that the defendants had engaged in the backdating of stock options grants to certain officers of the Company and by failing to account properly for expenses arising from the backdating. The complaint further alleges that defendants thus violated Generally Accepted Accounting Principles and filed false and misleading reports with the Securities and Exchange Commission. The complaint also contends that one or more of the defendants engaged in substantial and suspicious insider trading while in possession of material, non-public knowledge of the alleged backdating scheme.

The complaint further alleges that on or around July 27, 2006, defendant, the Company's Chief Financial Officer, disclosed that the Company was reviewing its stock options grants. On August 8, 2006, the Company announced that its Board of Directors had formed a special committee to investigate the stock option practices because the Company had identified some "discrepancies." The Company delayed the filing of its Form 10-Q for the period ending June 30, 2006, pending the outcome of the investigation. The Company admitted that it "believes it will need to record additional non-cash charges for stock-based compensation expense in prior periods . . . (which) will total approximately $10 million." As a result of the internal investigation, the Board stated that the Company's previously issued financial statements from February 2000 through June 30, 2006, should no longer be relied upon. Just three days later, on August 11, 2006, the Company disclosed that it intended to restate its prior financials and revealed that NASDAQ informed it on August 11 that the Company may be subject to delisting as a result of the matters disclosed thus far.

The price of Witness Systems common stock has fallen from its July 27, 2006, closing price of $18.19 per share to as low as $12.76 per share. The stock closed at $12.91 per share on August 11, 2006.

INDUSTRY CLASSIFICATION:
SIC Code: 7372
Sector: Technology
Industry: Software & Programming

COMPANY/ISSUER NAME:	Witness Systems, Inc.
COMPANY/ISSUER TICKER:	WITS
COMPANY WEBSITE:	http://www.witsys.com

FIRST IDENTIFIED COMPLAINT IN THE DATABASE

Ruth Rosenberg, et al. v. Witness Systems, Inc., et al.

COURT: N.D. Georgia	DOCKET NUMBER: 06-CV-1894
JUDGE NAME: Hon. Clarence Cooper
DATE FILED: 08/14/2006	SOURCE: Notice of Filing
CLASS PERIOD START: 04/23/2004	CLASS PERIOD END: 08/11/2006
TYPE OF COMPLAINT: Complaint (Unamended and Unconsolidated)
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Kahn Gauthier Swick, LLC (New Orleans) 650 Poydras St. Suite 2150, New Orleans, LA, 70130 (voice) (504) 455-1400, (fax) , lewis.kahn@kglg.com Motley Rice LLC (Atlanta) One Georgia Center; 600 West Peachtree Street, Suite 800, Atlanta, GA, 30308 (voice) 1-800-768-4026, (fax) , inquiry@motleyrice.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 2

DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT
Class Action Complaint for Violations of Federal Securities Laws - Jury Trial Demanded
Type: Complaint		Date on the document: 08/14/2006
U.S. District Court Civil Docket
Type: Docket		Date on the document: 12/01/2006
Order Granting Witness Systems Investor Group's Unopposed Motion To Consolidate Cases For All Purposes And To Appoint Lead Plaintiff And Lead Counsel
Type: Order		Date on the document: 1/25/2007

REFERENCE COMPLAINT

In Re: Witness Systems, Inc. Securities Litigation

COURT: N.D. Georgia	DOCKET NUMBER: 06-CV-1894
JUDGE NAME: Hon. Clarence Cooper
DATE FILED: 04/06/2007	SOURCE: Docket
CLASS PERIOD START: 04/23/2004	CLASS PERIOD END: 08/11/2006
TYPE OF COMPLAINT: Consolidated Complaint
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Kahn Gauthier Swick, LLC (New Orleans) 650 Poydras St. Suite 2150, New Orleans, LA, 70130 (voice) (504) 455-1400, (fax) , lewis.kahn@kglg.com Kahn Gauthier Swick, LLC (NY) 12 East 41st Street, 12th Floor, New York, NY, 10016 (voice) 212.920.4310, (fax) 212.696.3730, info@kglg.com Motley Rice LLC (Atlanta) One Georgia Center; 600 West Peachtree Street, Suite 800, Atlanta, GA, 30308 (voice) 1-800-768-4026, (fax) , inquiry@motleyrice.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 3

DOCUMENTS FOR THE REFERENCE COMPLAINT
Consolidated Amended Complaint For Violations Of Federal Securities Laws
Type: Complaint		Date on the document: 4/6/2007
Judgment
Type: Other		Date on the document: 3/31/2008
Order
Type: Order		Date on the document: 3/31/2008
Order
Type: Order		Date on the document: 3/31/2008
Notice Of Appeal
Type: Notice of Appeal		Date on the document: 04/29/2008
Judgment
Type: Order		Date on the document: 02/09/2009
U.S. District Court Civil Docket
Type: Docket		Date on the document: 2/10/2009

OTHER DOCUMENTS
Verified Shareholder Derivative Complaint For Violation Of The Federal Securities Laws And State Law Claims For Breach Of Fiduciary Duty, Abuse Of Control, Constructive Fraud, Corporate Waste, Unjust Enrichment, Gross Mismanagement And Action For Accounting
Case Name and/or Number: Miller, et al. v. Witness Systems, Inc., et al.
Type: Complaint		Date on the document: 08/29/2006
U.S. District Court Civil Docket
Case Name and/or Number: Miller, et al. v. Gould, et al.
Type: Docket		Date on the document: 10/06/2006
US Court of Appeals Docket
Case Name and/or Number: Ruth Rosenberg, et al. v. Gould, et al.
Type: Docket		Date on the document: 08/22/2008

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