LDK Solar Company Ltd. Summary: Several purported class action complaints have been filed in the U.S. District Courts for the Southern District of New York and Northern District of California. The first filed complaint, Tsang v. LDK Solar Company, Ltd., was filed on October 9, 2007, in the U.S. District Court for the Southern District of California. The complaint alleges violations of federal securities laws, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, including allegations of issuing a series of false and material misrepresentations to the market which had the effect of artificially inflating the market price of the Company's publicly-traded securities. By Court order, on December 14, 2007, the case was transferred to the Northern District of California. The case is now listed as a member case in the pending Northern District of California action, In re LDK Solar Securities Litigation, 07-CV-05182.
According to the complaint filed on the October 9, 2007, in U.S. District Court for the Northern District of California, the class action was commenced on behalf of purchasers of LDK Solar Co. Ltd. American Depositary Shares during the period from August 1, 2007 to October 3, 2007. Specifically, the complaint charges LDK and certain of its officers and directors with violations of the Securities Exchange Act of 1934. LDK manufactures multicrystalline solar wafers, which are the principal raw material used to produce solar cells. The complaint alleges that throughout the Class Period, defendants concealed the full extent of how badly flawed the Company’s internal controls were, preventing it from accurately measuring or reporting its inventory. As a result, the Company’s inventories were overstated by an estimated 25%, causing inflation in LDK’s assets, earnings and earnings per share (“EPS”) reported during the Class Period.
On October 3, 2007, LDK’s share price fell almost 25% following a report that LDK’s financial controller had resigned, stating that the Company lacked internal controls and that the Company’s reported 1,000 tonne inventory of polysilicon was overstated by 25%. LDK’s former controller, Charley Situ, reported these discrepancies to both the U.S. Securities and Exchange Commission and the Company’s external auditor, KPMG. LDK could not deny or confirm Situ’s allegations on October 3, 2007, but promised to investigate and issue a further statement. The Company has since stated it will have an independent outside auditor investigate Situ’s allegations. The Company’s ADSs, which traded as high as $76.75 on September 27, 2007, plummeted $16.66, or 24.39%, to close at $51.65 on October 3, 2007. The ADSs continued to decline in after-hours trading, falling to $47.49.
The complaint alleges that defendants’ Class Period statements describing LDK’s business fundamentals, financial results and continued sales and earnings growth potential were false and misleading as: (a) defendants had overstated LDK’s inventory of polysilicon prior to and during the Class Period and those false statements remained alive in the market during the Class Period; and (b) due to the Company’s inventory of polysilicon being overstated, the Company’s reported earnings and EPS prior to and during the Class Period were false and those false statements remained alive in the market during the Class Period.
On January 4, 2008, the Court entered the Order appointing a certain individual as Lead Plaintiff. On January 22, 2008, an order to transfer actions 07cv8766(JGK) and 07cv9745(JGK) to the Northern District of California as related to 07cv8766(JGK) was entered. Furthermore, on February 8, 2008, the Court entered an Order granting the motion to appoint Cohen, Milstein, Hausfield & Toll, P.L.L.C. as Lead Counsel. On March 10, 2008, the Lead Plaintiff filed a Consolidated Class Action Complaint. The defendants have responded by filing a motion to dismiss the Lead Plaintiff's Consolidated Class Action Complaint.
According to the transferred action, a stipulation and extending time to answer consolidated class action complaint was filed by LDK Solar Co., LTD. and several individuals on June 12, 2008.
On May 29, 2008, U.S. District Judge William Alsup denied the Defendants’ motion to dismiss.
A press release dated August 29, 2008 stated that investors are fighting for class certification in a lawsuit alleging LDK Solar Co. Ltd. and its executives committed a “massive” securities fraud by inflating the value of the company’s inventory of raw materials and understating the costs of producing solar wafers, which are used in devices that convert sunlight into electricity. The plaintiffs said in court documents filed Thursday in the U.S. District Court for the Northern District of California that the case was “perfectly suited” for treatment on a classwide basis because the class is so numerous that joinder of all the members would be impracticable, common questions of law and fact dominate the case, and the proposed class representative has typical claims of the class and is an “adequate and appropriate” representative.
On January 28, 2009, an Order granting plaintiff’s motion for class certification was entered by the court.
According to a press release dated March 3, 2010, LDK Solar Co., Ltd., a leading manufacturer of multicrystalline solar wafers, announced today that it has reached an agreement to settle the securities class action lawsuit pending in the U.S. District Court of Northern California. After submitting the proposed settlement agreement to the court on February 16, 2010, the court granted preliminary approval of the settlement on February 17, 2010. The settlement is not final until the class receives notice of the settlement and the court grants final approval of the settlement terms. Under the terms of the agreement, all of the claims in the securities class action lawsuit will be dismissed with prejudice. All of the defendants will receive a complete release of all the claims alleged in the case. The settlement agreement expressly states that it does not include any finding that any defendant committed any wrongful act. The defendants continue to maintain that the allegations in the case have no merit at all. To avoid legal expenses, uncertainties and distraction of management, LDK Solar elected to settle the case. As part of the settlement terms, LDK Solar and its insurance carrier will pay a total of $16 million (approximately 5% of the alleged damages) to compensate the class members and to cover all legal and administrative expenses.
On June 22, 2010, an Order Granting Final Approval Of Class Action Settlement was issued by the Court.
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